UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of
1934 (Fee Required)
For the fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities Act
of 1934 (No Fee Required)
For the transition period from _______________ to _______________
Commission File Number 33-16122
ILX INCORPORATED
ARIZONA 86-0564171
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2777 East Camelback Road, Phoenix, AZ 85016
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Registrant's telephone number, including area code (602)957-2777
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Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Class on which registered
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Common Stock, without par value Over the Counter
Preferred Stock, $10 par value
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of 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 X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
stock, as of the latest practicable date.
Class Outstanding at January 31, 1996
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Common Stock, without par value 12,664,510 shares
Preferred Stock, $10 par value 403,263 shares
At January 31, 1996, the aggregate market value of Registrant's common shares
held by non-affiliates, based upon the closing bid price at which such stock was
sold as reported by the National Association of Securities Dealers, was
approximately $5.2 million.
Portions of Registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on June 24, 1996 are incorporated in Parts II and III as
set forth in said Parts.
ILX INCORPORATED
1995 Form 10-K Annual Report
Table of Contents
PART I------------------------------------------------------------------------------------------------- 3
Item 1. Business------------------------------------------------------------------------------------- 3
Item 2. Properties----------------------------------------------------------------------------------- 6
Item 3. Legal Proceedings---------------------------------------------------------------------------- 8
Item 4. Submission of Matters to a Vote of Security Holders------------------------------------------ 8
PART II------------------------------------------------------------------------------------------------ 9
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters------------------------- 9
Item 6. Selected Financial Data----------------------------------------------------------------------- 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--------- 9
Item 8. Financial Statements and Supplementary Data---------------------------------------------------16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure----------16
PART III-----------------------------------------------------------------------------------------------17
Item 10. Directors and Executive Officers of the Registrant-------------------------------------------17
Item 11. Executive Compensation-----------------------------------------------------------------------17
Item 12. Security Ownership of Certain Beneficial Owners and Management-------------------------------17
Item 13. Certain Relationships and Related Transactions-----------------------------------------------17
PART IV------------------------------------------------------------------------------------------------18
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K------------------------------18
PART I
Item 1. Business
ILX Incorporated ("ILX" or the "Company") is an Arizona corporation formed in
October, 1986 for the purpose of developing, operating, financing and marketing
interval ownership interests in resort properties and engaging in other
leisure-oriented business activities. In November 1993, the Company acquired
interests in unimproved real estate through its acquisition of Genesis
Investment Group, Inc. and during 1994, ILX expanded its operations to include
marketing of skin and hair care products.
Resorts
ILX sells timeshare interests in resorts located in Arizona, Colorado, Florida,
Indiana and Mexico. Generally, ILX either owns an interest in the resort itself,
or it owns a designated number of timeshare interests in a resort and has a
corresponding right to sell those timeshare interests to third parties.
ILX owns an interest in the following resorts: Los Abrigados in Sedona, Arizona,
Kohl's Ranch Lodge in Gila County, Arizona, Golden Eagle Resort in Estes Park,
Colorado, and Varsity Clubs of America in Mishawaka, Indiana. The properties
owned by ILX or its subsidiaries are operated as hotels to the extent of unused
or unsold timeshare inventory.
In addition, ILX owns a designated number of timeshare interests in the
following resorts and has a right to sell those timeshare interests to third
party purchasers: Ventura Resort in Boca Raton, Florida and Costa Vida Vallarta
Resort in Puerto Vallarta, Mexico.
Except for the Costa Vida Vallarta Resort, described below, timeshare purchasers
acquire deed and title to an undivided fractional interest in a unit or type of
unit, which entitles the purchaser to use a unit at the selected resort and to
use the resort's common areas during a designated time period.
Each of the above referenced resorts is affiliated with a not-for-profit
organization, the members of which are the purchasers of timeshare interests in
each such resort. These not-for-profit organizations have certain recorded
governing documents that contain restrictions concerning the use of the resort
property.
With respect to those resort properties owned by ILX or its subsidiaries, a
portion of the price paid to ILX by a purchaser of a timeshare interest in those
resorts must be paid by ILX to the holder(s) of the underlying mortgage(s) on
the property in order to release such timeshare interest from the lender's
underlying encumbrance. This "release fee" ensures that the timeshare purchaser
can acquire clear title to his or her timeshare interest.
ILX began marketing timeshare interests in the Ventura Resort in Boca Raton,
Florida in 1987. The Ventura Resort is located across from Boca Beach in Boca
Raton, Florida. ILX is authorized by the states of Arizona and Florida to sell
timeshare interests in Ventura Resort in those states. ILX had approximately 20
weeks available for sale at December 31, 1995.
In 1986, ILX purchased, and in 1987 began operations at, the Golden Eagle
Resort, which is located in the town of Estes Park, Colorado, within three miles
of the Rocky Mountain National Park. ILX plans to offer a minimum of 1,785
timeshare weeks in the Golden Eagle Resort. Arizona, Colorado and Indiana have
authorized ILX to sell timeshare interests in Golden Eagle Resort in those
states. ILX had approximately 501 weeks available for sale in completed suites
at December 31, 1995.
In September, 1988, ILX acquired an ownership interest in the Los Abrigados
resort in Sedona, Arizona through BIS-ILE Associates ("BIS-ILE"), a partnership
that was formed to acquire and market the property and in which ILX held an
interest as a general partner. See ILE Sedona Incorporated below.
Marketing of timeshare interests in the Los Abrigados resort began in February,
1989. ILX, directly and through its wholly owned subsidiary, ILE Sedona
Incorporated, has served as managing general partner of BIS-ILE and its
successor, Los Abrigados Partners Limited Partnership, an Arizona limited
partnership ("LAP"), since inception. A total of 9,100 timeshare weeks may be
sold in Los Abrigados. Arizona, Colorado, Indiana, Iowa and Nevada have
authorized ILX to sell timeshare interests in Los Abrigados in those states. At
December 31, 1995, ILX had approximately 3,360 weeks available for sale, and
options to purchase 430 weeks had been extended to owners of timeshare interests
in the Golden Eagle Resort on substantially the same terms offered to current
purchasers. In addition, one to two year options have been extended to certain
owners of alternate year usage at Los Abrigados which allow the owners to
increase their ownership to every year usage. Such options are at prices in
excess of the current prices. Also at December 31, 1995, Genesis Investment
Group, Inc., a wholly owned subsidiary of ILX, holds an option to purchase 517
additional timeshare weeks for $2,100 each in Los Abrigados, which timeshare
weeks will be made available for sale upon exercise of the option.
The Costa Vida Vallarta Resort is a beach front resort located in Puerto
Vallarta, Mexico. During 1993, 1994, and 1995 ILX acquired timeshare weeks in
the resort that provide a right to occupy a specific week and unit in the resort
and to use the common areas of the resort (during the week of occupancy) through
and including the year 2009. Arizona, Colorado and Indiana have authorized ILX
to sell timeshare interests in the Costa Vida Vallarta Resort in those states.
ILX had approximately 53 timeshare interests available for sale as of December
31, 1995.
On June 1, 1995, ILX acquired ownership of Kohl's Ranch Lodge ("Kohl's Ranch").
Kohl's Ranch is a 10.5 acre property located 17 miles northeast of Payson,
Arizona. On June 14, 1995, the Arizona Department of Real Estate approved ILX's
application to sell timeshare interests in Kohl's Ranch. Timeshare sales
commenced in July, 1995. As of December 31, 1995, ILX had approximately 2,574
timeshare weeks available for sale. The Company has begun refurbishing Kohl's
Ranch and intends to maintain its authentic ranch atmosphere and decor. The
Company anticipates constructing six additional duplex cabins as needed to
accommodate timeshare sales, thus adding twelve 2-bedroom cabins, for a total of
64 units and 3,328 timeshare intervals.
The Company markets timeshare interests in Los Abrigados, Kohl's Ranch, the
Golden Eagle Resort and the Costa Vida Vallarta Resort from its Sales Offices
located at Los Abrigados and Kohl's Ranch. There are several other timeshare
resorts in Sedona and elsewhere in Arizona which draw upon the same metropolitan
Phoenix customers the Company does for both its Los Abrigados and Kohl's Ranch
Sales Offices. To date the Company has been able to successfully compete to
attract such customers to attend its timeshare presentations. The Company
markets its Golden Eagle interests exclusively from its Arizona and Indiana
sales offices and does not, therefore, compete directly with Colorado timeshare
resorts.
The Company's wholly owned subsidiary, Varsity Clubs of America ("VCA"), was
formed to capitalize on a perceived niche market: The potential demand for high
quality accommodations near prominent colleges and universities with nationally
recognized athletic programs. Large universities host a variety of sporting,
recreational, academic and cultural events that create a substantial and
relatively constant influx of participants, attendees and spectators. The
Varsity Clubs concept is a lodging alternative targeted to appeal to university
alumni, basketball or football season ticket holders, parents of university
students and corporate sponsors of university functions, among others. The
Varsity Clubs concept is designed to address the specific needs of these
individuals and entities by creating specialty timeshare hotels that have a
flexible ownership structure, enabling the purchase of anything from a single
day (such as the first home football game) to an entire football season. Each
Varsity Clubs facility will operate as a hotel to the extent of unsold unused
timeshare inventory.
The first Varsity Clubs facility was completed in August 1995 and is located in
Mishawaka, Indiana, approximately 2.8 miles from the University of Notre Dame
("Varsity Clubs of America-Notre Dame"). Customers purchase deed and title to a
floating number of night's use of a unit and unlimited use of the common areas
of the resort. Purchasers may also receive the right to utilize the facility on
specified dates, such as dates of home football games, for which they pay a
premium. The company operates the resort as a commercial lodging facility to the
extent of unsold intervals. At December 31, 1995, ILX had approximately 19,492
one night intervals available for sale. To the Company's knowledge, no other
timeshare properties exist proximate to the University of Notre Dame. In
addition, the Company believes the hotel will compete favorably for commercial
guests because of its superior facilities and amenities relative to other
lodging accommodations in the area.
The site for the second Varsity Clubs facility was acquired in July, 1995 and is
located in Tucson, Arizona, approximately 2.3 miles from the University of
Arizona. Construction of the Arizona facility is expected to commence in 1996.
ILX extends financing, not to exceed 90% of the purchase price of the ownership
interval, to qualified purchasers of timeshare interests in the Company's
various resorts. ILX sells with recourse a portion of the consumer obligations,
borrows against a portion, and carries the balance. On occasion, ILX reacquires
an interval from a customer who defaults on his obligation. Intervals are not
reacquired unless ILX has exhausted its collection attempts (which include a
series of telephone calls and letters and reporting to national credit bureaus)
and has determined the obligation to be uncollectible. Such reacquired ownership
interests are held for resale.
ILX's interval ownership plans compete both with other interval ownership plans
as well as hotels, motels, condominium developments and second homes. ILX
considers its competitive environment to include not only the areas surrounding
its properties but also other vacation destination alternatives. ILX's
competitive posture is based on the distinction of its products, the
desirability of the locations of its properties, the quality of the amenities
ancillary to the interval ownership weeks, the value received for the price and
the availability of a variety of destination locations. ILX plans to continue
exploring options for the development and marketing of new resort facilities.
ILE Sedona Incorporated
In September, 1988, ILX acquired, through its wholly owned subsidiary, ILE
Sedona Incorporated ("ILES"), a 40% interest in BIS-ILE, the owner in fee simple
of Los Abrigados resort. During 1989, ILX acquired additional interests that
increased its ownership in BIS-ILE. On January 8, 1990, BIS-ILE filed a petition
for relief with the United States Bankruptcy Court for the District of Arizona,
under Chapter 11 of the Bankruptcy Code. At that time, ILX owned 55.875% of
BIS-ILE. Sales of vacation ownership interests in Los Abrigados had ceased on
January 8, 1990, pending completion of the Chapter 11 filing. During 1990, while
BIS-ILE prepared its plan of reorganization, and in anticipation of that plan,
ILX increased its interest in BIS-ILE to 89.999%. On August 26, 1991, the
Bankruptcy Court approved BIS-ILE's amended plan of reorganization and sales of
vacation ownership interests in Los Abrigados resumed on September 20, 1991,
following the successful reorganization. On September 10, 1991, Los Abrigados
Partners Limited Partnership, an Arizona limited partnership ("LAP") became the
successor in interest to BIS-ILE. ILX, directly and through ILES, owns a total
of 78.5% of LAP, which now owns Los Abrigados. ILES serves as LAP's managing
general partner. LAP has contracted with ILX to manage the resort and to market
fee simple interval ownership interests in the resort through the sale of
membership interests in the Sedona Vacation Club.
Red Rock Collection
In July 1994, ILX, through its wholly owned subsidiary, Red Rock Collection
Incorporated ("RRC"), commenced sales of a complete line of spa and salon
formulated products for face, body, bath and hair care. The products are
produced by outside laboratories according to RRC's specifications and raw
materials are readily available. Currently, Red Rock Collection products
primarily are marketed through resort properties owned and operated by ILX,
through salons, and through direct mail to consumers. The resort-based sales
program includes an upscale amenities line, an in-room gift basket promotion and
retail product sales at ILX resort venues. In addition, Red Rock Collection
products are offered by ILX and its subsidiaries as tour promotion incentives.
RRC then markets by direct mail to these resort and tour customers who have
experienced Red Rock Collection products. RRC is also exploring opportunities to
offer RRC formulated amenities to outside resorts and hotels.
Genesis
ILX, through its wholly owned subsidiary Genesis Investment Group, Inc.
("Genesis"), holds for the purpose of liquidation ownership interests in real
estate, (both fee and lien), most of which is unimproved. ILX acquired Genesis
in November 1993 through the merger of ILX's wholly owned subsidiary and
Genesis. Pursuant to the terms of the merger, holders of Genesis common stock
received the right to receive five shares of ILX common stock and three shares
of ILX Series C Convertible Preferred stock for every ten shares of Genesis
common stock. (At the time of the merger, the Genesis shareholders were entitled
to receive a maximum of 305,964 shares of the ILX Series C Convertible Preferred
stock and 509,940 shares of ILX common stock.) Since the merger, Genesis has
continued to liquidate its real estate holdings and has acquired an option to
purchase 667 timeshare intervals in the Los Abrigados resort. Pursuant to such
option, Genesis had acquired 150 timeshare intervals as of December 31, 1995 and
has marketed the interests through LAP.
Other
ILX employs approximately 500 people.
Item 2. Properties
Los Abrigados Resort
Los Abrigados resort is located in Sedona, Arizona, approximately 110 miles
northwest of Phoenix. The resort consists of a main building which houses the
lobby and registration area, executive offices, meeting space, a health spa and
athletic club, food and beverage facilities and support areas. The hotel
contains 174 suites in 22 one and two story free-standing structures. In
addition, a two-bedroom historic homesite which has been renovated to include a
spa and other luxury features is also located on the property and has been
marketed by the Company. The resort has an outdoor swimming pool, tennis courts
and other recreational amenities and is situated on approximately 19 acres of
land.
The Company offers membership interests to customers in the form of deed and
title which provide the right to occupy the resort for a designated amount of
time each year in perpetuity. A total of 9,100 interval ownership memberships
may be sold, of which approximately 3,360 were available for sale at December
31, 1995. In addition, Genesis holds an option to purchase 517 additional
memberships at $2,100 each. One to two year options to purchase approximately
430 of these available memberships have been extended to owners of timeshare
interests in the Golden Eagle Resort on terms substantially the same as those
offered to current purchasers. Similarly, purchasers of bi-annual interests in
Los Abrigados have been offered one and two year options to expand to annual
interests for specified prices. Such prices exceed current offering prices.
The Company holds fee simple title to the property, which is encumbered by a
first deed of trust securing loans in the principal amount of $805,000, and by
two subordinate deeds of trust of equal priority securing repurchase obligations
relating to borrowings against consumer notes receivable of approximately
$246,828 and sales of consumer notes receivable with recourse in the amount of
approximately $17 million at December 31, 1995. In addition, 320 interests which
are not encumbered by the first and second deeds of trust secure two notes
payable to affiliates totaling $580,000 at December 31, 1995.
Golden Eagle Resort
The Golden Eagle Resort, located within the corporate limits of the Town of
Estes Park, Colorado and within three miles of the Rocky Mountain National Park,
contains a resort lodge which overlooks the Estes Valley and is bounded
generally by undeveloped forested mountainside land. Approximately four acres of
land are owned along with a four-story wood-frame main lodge that was
constructed in 1914. The lodge property contains 27 guest rooms, a restaurant,
bar, library and outdoor swimming pool, as well as two other free standing
buildings containing six guest rooms and support facilities. Space is available
to construct additional suites in the lodge and adjacent buildings. The Company
also owns a residence in a duplex adjacent to the property which may be
marketed.
The Company offers deed and title interests which provide the right to occupy a
specific unit for a specific week each year in perpetuity and plans to offer a
minimum of approximately 1,785 such interval ownership weeks, exclusive of the
adjacent condominium. Approximately 501 interests in completed suites are
available for sale at December 31, 1995. The Company offers certain purchasers
of Golden Eagle interests the option to convert their ownership to other ILX
owned properties at a designated time for a pre-determined amount. Golden Eagle
interests received from converting owners are offered for resale.
The Company holds fee simple title to the property which is encumbered by a
first deed of trust securing a loan in the principal amount of $1,549,990 and by
a second deed of trust securing repurchase obligations relating to borrowings
against consumer notes receivable in the principal amount of $1,195,716 and
sales of consumer notes receivable sold with recourse in the approximate amount
of $923,000 at December 31, 1995.
Kohl's Ranch Lodge
On June 1, 1995, ILX acquired ownership of Kohl's Ranch Lodge ("Kohl's Ranch").
Kohl's Ranch is a 10.5 acre property located 17 miles northeast of Payson,
Arizona. It is bordered on the eastern side by Tonto Creek and is surrounded by
Tonto National Forest. The main lodge of Kohl's Ranch contains 41 guest rooms
and a variety of common area amenities. Kohl's Ranch also includes eight (8)
one- and two-bedroom cabins along Tonto Creek, a triplex cabin with two
one-bedroom units and one efficiency unit, and a free standing building that
contains sales offices and food and beverage facilities.
On June 14, 1995, the Arizona Department of Real Estate approved ILX's
application to sell timeshare interests in Kohl's Ranch. In July, 1995, the
Company began offering membership interests to customers in the form of deed and
title which provide the right to occupy the resort for a designated amount of
time each year in perpetuity. Timeshare sales commenced in July, 1995. As of
December 31, 1995, ILX had 2,574 timeshare weeks available for sale. In addition
to the sale of timeshare interests, ILX intends to continue operating Kohl's
Ranch as a lodge-hotel. ILX has begun refurbishing Kohl's Ranch and intends to
maintain its authentic ranch atmosphere and decor. ILX anticipates commencing
construction of six new duplex cabins on the property as needed to accommodate
timeshare sales, thus adding twelve two-bedroom cabins, for a total of 64 units
and 3,328 timeshare weeks. The Company holds fee simple title to the property
which at December 31, 1995, is encumbered by a first position note and deed of
trust in the amount of $853,500, a second position note and deed of trust in the
amount of $334,800, and a third position note and deed of trust securing
repurchase obligations relating to borrowings against consumer notes receivable
in the principal amount of $338,849.
Interval Ownership Interests in Costa Vida and Ventura Resorts
At December 31, 1995, the Company owned and held for sale 20 interval ownership
interests in the Ventura Resort in Boca Raton, Florida, 53 interval ownership
interests in the Costa Vida Resort in Puerto Vallarta, Mexico, and 55 interval
ownership interests in other resort properties worldwide. These intervals are
owned free and clear by the Company at December 31, 1995.
Varsity Clubs of America - Notre Dame
Varsity Clubs of America - Notre Dame is located in Mishawaka, Indiana ,
approximately 2.8 miles from the University of Notre Dame. The hotel is situated
on approximately four acres of land and consists of a three story main building
which houses 60 one and two-bedroom suites, the lobby, gift shop, meeting space,
member lounge, health club, and food and beverage facilities and a separate one
story building which contains a three-bedroom suite and a one-bedroom suite.
The Company offers membership interests to customers in the form of deed and
title which provide the right to occupy the resort for a designated amount of
time each year in perpetuity. Memberships are offered in one day intervals.
Approximately 22,568 one day intervals will be offered for sale. Approximately
19,492 one day intervals are available for sale at December 31, 1995.
The Company holds the fee simple title to the property, which is encumbered by a
first mortgage securing construction financing in the amount of $4,186,869 and a
second mortgage securing sales of consumer notes receivable with recourse in the
approximate amount of $2.3 million at December 31, 1995.
Varsity Clubs of America - Tucson
The site for the second Varsity Clubs facility was acquired in July, 1995 and is
located in Tucson, Arizona, approximately 2.3 miles from the University of
Arizona. Construction of the Arizona facility is expected to commence in 1996.
The Company has a commitment for construction financing for the Arizona facility
in the amount of $6 million, which is expected to be sufficient to build and
furnish the property. In addition, the commitment includes up to $20 million in
financing for eligible notes received from the sale of timeshare interests in
the Arizona facility. The property is held in fee simple title and is encumbered
by a first deed of trust in the amount of $701,400 at December 31, 1995.
Land
The Company owns various parcels of unimproved real estate in Arizona through
its wholly owned subsidiary Genesis and is presently marketing these properties.
At December 31, 1995, the real estate held for sale less encumbrances was
recorded at $1,545,184. It is the Company's intention to liquidate this land in
the next twelve to twenty-four months.
Red Rock Collection Building
The RRC office and warehouse facilities are housed in an 8,400 square foot
building in Phoenix, Arizona. RRC leases the facility under a one year lease
through December 31, 1996, and has an option to renew the lease for four
additional one year periods through December 31, 2000.
Company Headquarters
The Company leases its corporate headquarters in Phoenix, Arizona under a five
year lease through April 30, 1998. The terms of the lease provide the Company
with the option to extend the lease for three additional one year periods and
with a right of first refusal to purchase the building. The landlord has the
right to cancel the lease upon one year notice and payment of a $20,000
cancellation fee in the event the building is sold. Such cancellation may not
occur prior to May 1, 1997. The landlord has exercised this right, subject to
the ability of the purchaser to perform.
Other
In the opinion of management, the Company's properties are adequately covered by
insurance.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded over-the-counter under the National
Association of Securities Dealers (NASD) trading symbol ILEX. The following
table sets forth the high and low bid and ask prices for the stock for each full
quarterly period during 1995 and 1994. The following over-the-counter market
quotations reflect inter-dealer prices, without retail markup, markdown or
commission and may not necessarily represent actual transactions.
Bid Ask
------------- --------------
Quarter Ended High Low High Low
- ------------- ---- ---- ---- ---
December 31, 1995 2.38 1.19 2.50 1.25
September 30, 1995 2.44 1.81 2.50 1.94
June 30, 1995 1.88 1.13 2.06 1.19
March 31, 1995 1.56 1.13 1.69 1.25
December 31, 1994 1.63 1.13 1.75 1.31
September 30, 1994 1.75 1.50 1.94 1.56
June 30, 1994 2.00 1.13 2.13 1.31
March 31, 1994 1.75 1.19 2.00 1.25
On January 31, 1996, the number of holders of the Company's common stock was
approximately 1,300. No dividends have been declared by the Company since
inception and dividends are not anticipated in the foreseeable future.
Item 6. Selected Financial Data
Year ended December 31,
--------------------------------------------------------------
1995 1994 1993(1) 1992 1991
----------- ----------- ----------- ----------- ----------
Revenue $32,079,049 $29,950,669 $20,459,379 $18,856,660 $6,095,859
Net income (loss) 624,663 2,148,287 2,076,231 1,325,874 (307,051)
Net income (loss) per common
and equivalent share .05 .17 .18 .12 (.04)
Total assets 37,752,513 28,403,404 24,906,969 15,748,315 15,026,975
Notes payable 15,027,857 7,332,261 5,408,898 4,865,107 5,577,229
Total shareholders' equity 13,775,102 12,957,129 10,541,495 6,477,838 5,095,895
(1) The 1993 data includes the effects of the acquisition of Genesis effective
November 1, 1993.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion of the Company's financial condition and results of
operations includes certain forward looking statements. When used in this
report, the words "estimate", "projection", "plan" and "anticipates" and similar
terms are intended to identify forward looking statements that relate to the
Company's future performance. Such statements are subject to substantial
uncertainty. Readers are cautioned not to place undue reliance on forward
looking statements set forth below. The Company undertakes no obligation to
publicly release the results of any revisions to any of the forward looking
statements contained herein.
Results of Operations
Fiscal Year 1994 to 1995
Sales of timeshare interests of $21,353,758 in 1995 were 14.1% higher than sales
of $18,713,970 in 1994. The increase in sales from 1994 to 1995 reflects 1995
sales of interests in both Varsity Clubs of America-Notre Dame and in the Kohl's
Ranch, net of a decrease in sales made from the Phoenix Sales Office.
Sales of interests in Varsity Clubs of America-Notre Dame recognized in 1995
were $5,233,023, and include approximately $513,000 in sales made in 1994 for
which recognition was deferred until 1995 when construction of the facility was
substantially complete. 1995 sales include $1,122,043 in sales of interests in
Kohl's Ranch. Sales of Kohl's Ranch timeshares commenced in July 1995, following
acquisition of the property in June. Sales of interests in Varsity Clubs of
America-Notre Dame and Kohl's Ranch are generated primarily from the sales
offices at the respective properties.
The Sedona Sales Office sells primarily interests in the Los Abrigados resort
and the Golden Eagle Resort. Sedona Sales Office closing rates (number of
timeshare sales divided by number of timeshare tours) and efficiency rates
(timeshare revenue divided by the number of timeshare tours) both increased from
1994 to 1995. As a result, sales of timeshare interests by the Sedona Sales
Office (excluding upgrades by existing customers) increased from 1994 to 1995 by
approximately 2% ($298,000) on 11.5% fewer tours. In addition, upgrades by
existing owners and other specialty programs increased by approximately $451,000
from 1994 to 1995. The reduction in tours to the Sedona Sales Office is due in
part to the allocation of tours to the new Kohl's Ranch Sales Office. The
Company is in the process of relocating and expanding its telemarketing
operations in order to increase tour flow to both the Sedona and Kohl's Ranch
Sales Offices.
On April 1, 1995, the Company closed the Phoenix Sales Office which had sold
primarily interests in Los Abrigados, in favor of directing all Phoenix area
potential customers to the Sedona Sales Office. The Sedona Sales Office has had
consistently higher closing rates than the Phoenix Sales Office. The Phoenix
Sales Office generated approximately $4.7 million in timeshare sales in 1994 and
approximately $771,000 in 1995, prior to closure of the office.
1994 sales of timeshare interests include the recognition of $428,100 in
deferred revenue from a 1992 bulk sale.
Cost of timeshare interests as a percentage of sales of timeshare interests has
increased slightly from 1994 to 1995, excluding the 1994 bulk sale revenue
recognition for which there was no related cost of sale. The increase reflects
sales of interests in Varsity Clubs of America-Notre Dame which have a higher
product cost than interests in the Los Abrigados resort.
The increase in resort operating revenue from $8,764,558 in 1994 to $8,868,344
in 1995 reflects revenue from Varsity Clubs of America-Notre Dame which opened
in mid August 1995 and revenue from Kohl's Ranch which was acquired on June 1,
1995, net of reduced room revenue at the Los Abrigados resort as a result of the
increasing usage of the resort by prospective timeshare purchasers and timeshare
owners and decreasing availability of rooms for resort guests. The cost of
resort operations as a percentage of revenues has increased from 1994 to 1995
due to the start up of operations at Kohl's Ranch and Varsity Clubs of
America-Note Dame and due to the decreasing occupancy of traditional resort
guests at Los Abrigados as timeshare owners and prospective purchasers, who pay
substantially reduced rates for their room usage, utilize a greater portion of
the facilities.
Occupancy at Kohl's Ranch was lower in 1995 than it is expected to be in 1996
and beyond because renovations at the resort in 1995 reduced the number of rooms
available for rental. In addition, the planned expansion of timeshare marketing
programs in 1996 is expected to create demand for a greater number of rooms by
prospective timeshare purchasers. Kohl's Ranch resort operating expenses in 1995
include repairs, landscaping, cleaning, and training associated with start up of
the operation.
Occupancy at Varsity Clubs of America-Note Dame was low in 1995 due to minimal
pre-opening marketing of the facility to groups and individual hotel guests.
Occupancy is expected to increase in 1996 because additional room nights will be
utilized by prospective timeshare purchasers and by timeshare owners and because
increased traditional hotel demand is expected as a result of the hotel
marketing program implemented in the fourth quarter of 1995.
Sales of land and other and the associated cost of land sold and other in both
1994 and 1995 reflect the sale of unimproved real property held by Genesis and
sales of Red Rock Collection products. 1994 Genesis sales include the sale of
subdivided lots and a large, unimproved parcel. 1995 Genesis sales include sales
of three large, unimproved parcels. The land held by Genesis was recorded in the
November 1993 acquisition at its estimated fair market value. The spread between
sales of land and the cost of land sold reflects the appreciation of the
particular parcels sold. Cost of land sold as a percentage of sales of land
increased from 1994 to 1995 due to variations in appreciation due to the unique
attributes of each parcel.
Sales of Red Rock Collection consumer products increased from $234,975 in 1994
to $621,878 in 1995, including $402,042 in intercompany sales in 1995 which are
eliminated in consolidation, due to a full year of sales in 1995 and due to
increased use of Red Rock Collection products for incentives for prospective
timeshare purchasers. Sales of Red Rock Collection products commenced July 1,
1994.
Advertising and promotion as a percentage of revenue is comparable between years
after excluding sales of land each year and the recognition of the 1992 bulk
timeshare sale in 1994 which have no associated advertising and promotion
expenses.
General and administrative expenses increased from $3,198,604 in 1994 to
$4,106,180 in 1995 because 1995 reflects the expense of approximately $400,000
in bond offering costs, and also the write-off of approximately $320,000 in
costs for Varsity Clubs of America sites and associated development costs. The
Company abandoned its plans for a $10 million convertible bond offering in
December 1995 because of the underwriter's inability to timely place the bonds.
The proceeds of the bond offering were intended to be used for expansion of
Varsity Clubs of America. The Company canceled its options on its Varsity Clubs
of America sites near the University of Iowa and Oklahoma because it no longer
expects to construct at these sites within the option period. The Company also
canceled its options for sites near Penn State and Auburn University in the
first quarter of 1996. The Company believes these sites, or other suitable
sites, may be available at such time as it desires to construct at these
locations and at prices and terms no less favorable than under the forfeited
options, including costs to extend the options beyond their original expiration
date. 1995 general and administrative expenses also reflect the start up of
Varsity Clubs of America-Notre Dame. 1994 general and administrative expenses
include the amortization of deferred Red Rock Collection costs as described
below.
The provision for doubtful accounts relates primarily to sales of timeshare
interests. The Company recognizes a bad debt provision of 6% of most timeshare
sales, based on industry averages. The 1994 provision of only 4.1% of timeshare
sales reflects the 6% accrual, net of a reduction to reflect collection
experience on prior years' sales more favorable than expected.
The increase in interest expense from $666,141 in 1994 to $1,265,227 in 1995
reflects an increase in notes payable, including the note payable for the
construction of Varsity Clubs of America-Notre Dame, the Kohl's Ranch
acquisition notes, a full year of interest on the notes arising from the 1994
acquisition of the Los Abrigados Limited Partners Class A partnership interest
and increased borrowings against consumer notes receivable. The Company has
elected to finance its Kohl's Ranch consumer notes and a portion of its Golden
Eagle consumer notes by borrowing against (hypothecating) the notes, rather than
selling the notes, because of the favorable installment sales tax treatment
available for hypothecated notes.
The increase in interest income from $402,596 in 1994 to $627,081 in 1995
reflects the increase in consumer paper retained by the Company. The Company
hypothecates the majority of its retained paper.
Income tax benefits increased from $161,799 in 1994 to $547,216 in 1995. In
1994, tax benefits resulted from decreases in the valuation allowance as a
result of the ability to utilize loss carryforwards and built in losses arising
from the Los Abrigados resort and from Genesis loss carryforwards. 1995 tax
benefits reflect the elimination of the remaining valuation allowance on the
Genesis net operating loss carryforwards. The elimination was based on the
development of tax strategies from which management concluded the loss
carryforwards would more likely than not be utilized. A valuation allowance had
been established to reflect the uncertainty of the utilization of the Los
Abrigados resort deferred tax assets and the Genesis net operating loss
carryforwards.
The decrease in minority interests from $1,440,034 in 1994 to $501,246 in 1995
reflects the acquisition of the LAP Class A limited partnership interests
effective July 1994, the decrease in LAP net income in 1995 and differences in
minority interest ownership of the Genesis parcels sold in 1994 and 1995. The
decrease in LAP net income between years is a result of closure of the Phoenix
Sales Office and reduced profitability of Los Abrigados hotel operations due to
decreased availability of rooms for resort guests.
Fiscal Year 1993 to 1994
Sales of timeshare interests of $18,713,970 in 1994 were 52.6% higher than sales
of $12,263,619 in 1993. The increase in sales from 1993 to 1994 reflects
improved closing rates in the Sedona Sales Office and, in the 3rd quarter of
1994, the expansion of the Sedona Sales Office to accommodate a greater number
of tours. In addition, sales from the Phoenix Sales Office increased following
the Company's assumption of this operation, as discussed below.
Included in 1994 sales of timeshare interests is $428,100 in revenue from a bulk
sale of 667 weekly intervals in Los Abrigados resort which occurred in 1992. The
1994 revenue had been deferred pending collection of the $900,000 note
receivable arising from the sale which was collected in March 1994.
Advertising and promotion as a percentage of sales increased from 15.5% in 1993
to 19.8% in 1994 due to the acquisition of the Phoenix Sales Office, net of
increased closing rates at the Sedona Sales Office. Effective January 31, 1994,
the Company acquired the assets of the organization which had performed the
sales and marketing for the Phoenix Sales Office and the Company assumed those
sales and marketing operations. Prior to that date, the Company paid a flat
percentage of sales to the outside organization which operated in facilities it
leased from the Company and that percentage of sales was included in cost of
timeshare interests sold. After the acquisition, the Company began recording the
costs of generating tours to and operations of the Phoenix Sales Office as
advertising and promotion expenses. Commissions and other compensation paid to
sales staff are recorded as costs of timeshare interests sold. The effect was an
increase in advertising and promotion expense and a corresponding decrease in
cost of timeshare interests sold as a percentage of sales of timeshare interests
in 1994. Costs of timeshare interests sold as a percentage of sales of timeshare
interests decreased from 40.8% in 1993 to 35.2% in 1994.
The increase in resort operating revenue from $8,072,260 in 1993 to $8,764,558
in 1994 reflects increased total resort occupancy and average daily rate from
resort guests, and increased utilization of food and beverage outlets. The
improvements in resort occupancy are a result of the increasing usage of the
resort by prospective timeshare purchasers and timeshare owners, net of the
decreasing availability of rooms for resort guests. The cost of resort
operations as a percentage of resort operating revenue increased to 89.1% in
1994 from 86.3% in 1993 because prospective purchasers and timeshare owners (an
increasing portion of occupancy) pay substantially reduced rates for their room
usage and because the variable cost of providing food and beverage is greater as
a percentage of corresponding revenue than the variable cost as a percentage of
revenue of providing rooms to resort guests.
Sales of land and other and the associated cost of land sold and other reflect
sales of unimproved real property acquired in the November 1993 Genesis
acquisition and, in 1994, sales of Red Rock Collection products. 1993 sales of
$123,500 and the associated cost of sales of $113,618 reflect Genesis sales of
subdivided lots. Included in 1994 activity are sales of land of $2,237,166 and
the associated cost of sales of $1,796,974, representing Genesis sales of the
remainder of the subdivided lots and the sale of a large, unimproved parcel.
Red Rock Collection sales of $234,975 are included in 1994 sales of land and
other. Red Rock Collection sales commenced July 1, 1994. Amortization of
approximately $929,000 in deferred Red Rock Collection costs is included in
general and administrative expense in 1994.
General and administrative expenses increased as a percentage of revenue from
7.4% in 1993 to 10.7% in 1994 because of the amortization of deferred Red Rock
Collection costs described above and because of the recognition of other Red
Rock general and administrative costs. Excluding both Red Rock Collection
revenues and expenses, general and administrative expenses as a percentage of
revenue declined to 5.8% in 1994 from 7.4% in 1993.
The decrease in the 1994 doubtful accounts provision to 4.1% as compared to 5.4%
in 1993, as a percentage of sales of timeshare interests, reflects collection
experience more favorable than expectations.
The increase in interest income from $359,908 in 1993 to $402,596 in 1994
reflects increased consumer paper retained by the Company.
The increase in interest expense from $599,238 in 1993 to $666,141 in 1994
reflects greater balances outstanding on notes payable and differences in
interest rates and terms among notes.
Income tax benefits increased from $100,000 in 1993 to $161,799 in 1994. In both
1993 and 1994, tax benefits resulted from decreases in the valuation allowance
as a result of the ability to utilize loss carryforwards and built in losses
arising principally from the Los Abrigados resort. The valuation allowance had
been established to reflect the uncertainty of the utilization of the deferred
tax assets.
In 1993 an additional tax asset was recorded to reflect the future tax benefit
of the Genesis net operating loss carryforwards and a valuation allowance was
recorded to offset the full amount of the asset. This valuation allowance was
reduced in 1994 due to improvements in the Arizona real estate market and the
development of tax strategies from which management concluded that a portion of
the net operating loss carryforwards would more likely than not be utilized.
The increase in minority interests from $814,520 in 1993 to $1,440,034 in 1994
reflects continued increased profitability of LAP, net of a decrease in the
minority interest ownership of LAP effective July 1, 1994, of 7.5%. In addition,
1994 minority interests include approximately $236,000 in partnerships in which
the Company's Genesis subsidiary is a partner.
During the third quarter of 1994, the Company opened a sales office adjacent to
the site of its first Varsity Clubs of America near the University of Notre Dame
in Indiana. Construction commenced in the fourth quarter of 1994 and was
completed in August 1995. Sales and marketing expenses of approximately $283,000
for promoting sales of Varsity Clubs of America-Notre Dame were expended during
1994 and are included in advertising and promotion. Revenue generated by these
marketing efforts, however, was deferred pending substantial completion of the
facility. Deferred revenue of $513,000, net of associated costs of sales of
$148,000, is included in deferred revenue at December 31, 1994. The Notre Dame
Sales Office also offers timeshare interests in the Company's other resorts.
Sales of intervals in other resorts of approximately $319,000 are included in
1994 sales of timeshare interests.
Liquidity and Capital Resources
The Company's liquidity needs principally arise from the necessity of financing
notes received from sales of timeshare interests. In that regard, the Company
has $13 million in lines of credit issued by a financing company under which
conforming notes (notes that meet the credit criteria, term and interest rate
specified by the lender) from sales of interval interests in Los Abrigados and
the Golden Eagle Resort can be sold on a recourse basis through September 1996.
In addition, the Company has an open ended arrangement with a finance company
which is expected to provide financing of at least $5 million through 1996. At
December 31, 1995, approximately $7.7 million is available under the fixed
commitment lines and approximately $3 million is expected to be available on the
open ended line. The Company also has a financing commitment whereby the Company
may borrow up to $2.5 million against non-conforming notes from sales of
interval interests in Los Abrigados and the Golden Eagle Resort through
September 1998. Approximately $500,000 was available under this commitment at
December 31, 1995.
The Company has a $10 million financing commitment whereby the Company may sell
eligible notes received from sales of timeshare interests in Varsity Clubs of
America - Notre Dame on a recourse basis through March 1996. The commitment may
be extended for an additional eighteen month period and an additional $10
million at the option of the financing company. In March 1996, the financing
company verbally approved the extension and commenced preparation of written
documentation.Approximately $7.6 million was available under this commitment at
December 31, 1995.
The Company has a financing commitment whereby it may borrow up to $10 million
against conforming notes received from sales of timeshare interests in Kohl's
Ranch through August 1997. Approximately $9.6 million was available on this
commitment at December 31, 1995.
The Company will continue to retain certain non-conforming notes which have one
to two year terms or which do not otherwise meet existing financing criteria,
and finance these notes either through internal funds or through borrowings
secured by the non-conforming notes. The Company will pursue additional credit
facilities to finance conforming and non-conforming notes as the need for such
financing arises.
The Company has a $500,000 line of credit from one financial institution and a
$400,000 line of credit from another, both available for working capital. At
December 31, 1995, $755,000 was available on the lines.
In March 1995, the Company borrowed an additional $1,010,000 from the Steele
Foundation, Inc., the first mortgage holder on the Golden Eagle Resort. The
Company has used these funds for further expansion of food and beverage
facilities, refurbishment of suites and the construction of additional
administrative facilities at Los Abrigados resort.
In June 1995, the Company acquired Kohl's Ranch, a ten acre rustic resort near
Payson, Arizona for $1,590,000, consisting of a $50,000 cash down payment,
assumption of the existing deed of trust of $932,250, seller financing of
$367,750, and the issuance of 120,000 shares of ILX restricted common stock
valued at $2 per share. As described above, the Company has $10 million in
receivables financing for sales of timeshare interests in Kohl's Ranch through
August 1997.
In June 1995, the Company signed a letter of intent to offer to the public, on a
firm underwriting basis, $10,000,000 in convertible secured bonds with a
$1,500,000 overallotment option through Brookstreet Securities Corporation
("Brookstreet"). In October 1995, the terms of the offering were reduced to
provide for $3,000,000 in convertible secured bonds with a $450,000
overallotment option. The offering was abandoned in December 1995 because
Brookstreet was unable to timely place the bonds.
In July 1995, the Company acquired land near the University of Arizona to be the
site of its second Varsity Clubs of America. The Company made a down payment of
$300,600 and the seller is carrying the balance of $701,400. The Company has
received a commitment for construction financing for the facility in the amount
of $6 million, which is expected to be sufficient to build and furnish the
property, and a commitment for up to $20 million in financing for eligible notes
received from sales of timeshare interests in the property.
In July 1995, the Company borrowed $900,000 from Joseph P. Martori and Cynthia
J. Polich, as Trustees for Cynthia J. Polich, and from Edward John Martori (an
affiliate), secured by 320 timeshare interests (reduced to 220 in January 1996)
in the Los Abrigados resort. The Company used these funds for refurbishment at
Los Abrigados.
In September 1995, the Company, through a subsidiary, entered into an agreement
to acquire a portion of the Hotel Syracuse in Syracuse, New York and to develop
and market timeshare interests in the property. The Company has a financing
commitment for $5 million in acquisition and development non-recourse financing,
which is expected to be sufficient to acquire and construct the suites, and $30
million in receivables financing through September 1998.
During 1995, the Company borrowed $4,599,216, the remaining balance on its $5
million Varsity Clubs of America-Notre Dame construction financing commitment,
to complete the construction of the hotel facility. The hotel opened in August
1995. Under the terms of the financing commitment, the principal is repaid via
release payments as timeshare interests are sold.
In November 1995, the Company entered into a management agreement with one of
its timeshare lenders, with respect to the Los Abrigados resort. Under the
agreement the lender committed to advance $3.5 million, provide strategic
planning and consultation with respect to timeshare sales of 3,500 Los Abrigados
intervals and reduce the holdback requirements on timeshare paper purchased by
the lender. The advance, plus a 12% cost of funds on the outstanding balance of
the advance, will be repaid in cash and in kind from one-half the monthly cash
flows from the sale of the 3,500 timeshare intervals. At December 31, 1995, the
lender had advanced $1.5 million on its commitment.
In February 1996, the Company borrowed an additional $1,760,000 from the first
mortgage holder on the Los Abrigados resort. The Company intends to use these
funds for improvements to the Los Abrigados resort and Kohl's Ranch and for
working capital.
Effective March 1, 1996, the Company, through a subsidiary, became the managing
general partner of the partnership which owns the Lomacasi Resort in Sedona,
Arizona, a 5.27 acre property approximately one mile from the Los Abrigados
resort. The Company acquired its partnership interest for a $25,000 capital
contribution. The resort is encumbered by non-recourse deeds of trust on the
property totaling approximately $2.2 million. The Company intends to initially
use the resort to provide lodging accommodations to prospective timeshare
purchasers at the Company's Sedona Sales Office, thereby creating more
availability of rooms for resort guests at the Los Abrigados resort. The Company
may offer timeshare interests in the resort in the future.
Cash provided by operating activities increased from $2,307,986 in 1993 to
$3,169,370 in 1994 due to greater proceeds from sales of notes receivable, net
of increased additions to resort property under development for Varsity Clubs of
America-Notre Dame. The change from cash provided by operating activities of
$3,169,370 in 1994 to cash used in operating activities of $5,496,092 in 1995
reflects reduced net income in 1995, improvements to Los Abrigados and the
completion of construction of the Varsity Clubs of America-Notre Dame facility
in 1995, and increased notes receivable retained by the Company.
Cash used in investing activities of $1,301,986 and $1,305,936 in 1994 are
comparable but reflect the acquisition of the minority interest in LAP in 1994
and greater increases in Red Rock Collection deferred assets in 1993 than 1994.
Cash flows from investing activities changed from cash used in investing
activities of $1,305,936 in 1994 to cash provided by investing activities of
$137,188 in 1995 due to the acquisition of the minority interest in LAP in 1994,
addition of Red Rock Collection plant and equipment in 1994 and the write-off of
Varsity land deposits in 1995.
The change from cash provided by financing activities of $338,185 in 1993 to
cash used in financing activities of $287,954 in 1994 reflects greater principal
payments on notes payable in 1994, net of increased borrowings. Cash flows from
financing activities changed from cash used in financing activities of $287,954
in 1994 to cash provided by financing activities of $5,469,835 in 1995 due to
increased borrowings, including borrowings for the construction of Varsity Clubs
of America-Notre Dame and the acquisition of Kohl's Ranch.
Although no assurances can be made, based on the prior success of the Company in
obtaining necessary financings for operations and for expansion, the Company
believes that with its existing financing commitments, its cash flow from
operations and the contemplated financings discussed above the Company will have
adequate capital resources for at least the next twelve to twenty-four months.
Accounting Matters
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121"), which is effective for fiscal years beginning
after December 15, 1995. The Company does not believe the adoption of SFAS 121
will have a significant impact on the Company's financial position, results of
operations, or cash flows.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which will be effective for the Company beginning January 1,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company intends to continue to apply APB Opinion No. 25
to its stock based compensation awards to employees and to disclose the required
pro forma effect on net income and earnings per share.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data required by Item 8
are set forth in Part IV, Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Information in response to this Item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
Item 11. Executive Compensation
Information in response to this Item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information in response to this Item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
Item 13. Certain Relationships and Related Transactions
Information in response to this Item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Consolidated Financial Statements Page or Method of Filing
--------------------------------- ------------------------
(i) Consolidated Financial Statements and Pages 20 through 40
Notes to Consolidated Statements of
the Registrant, including Consolidated
Balance Sheets as of December 31, 1995
and 1994 and Consolidated Statements
of Operations, Shareholders' Equity
and Cash Flows for each of the three
years ended December 31, 1995, 1994
and 1993.
(ii) Report of Deloitte & Touche LLP Page 19
(a) (2) Consolidated Financial Statement Schedules
------------------------------------------
Reserve for possible credit losses Page 42
Schedules other than those mentioned
above are omitted because the
conditions requiring their filing do
not exist or because the required
information is given in the financial
statements, including the notes
thereto.
(a) (3) Exhibits
--------
The Exhibit Index attached to this
report is hereby incorporated by
reference.
(b) Reports on Form 8-K
-------------------
None
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
ILX Incorporated
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of ILX Incorporated
and subsidiaries (the "Company") as of December 31, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1995
and 1994, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therin.
Deloitte & Touche LLP
Phoenix, Arizona
March 27, 1996
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------
1995 1994
------------ ------------
Assets
Cash and cash equivalents $ 3,746,518 $ 3,635,587
Notes receivable, net (Notes 2, 7, 10, 11 and 14) 8,785,487 6,750,896
Resort property held for timeshare sales
(Notes 3, 10, and 11) 17,191,791 9,407,733
Resort property under development (Notes 6 and 10) 1,119,080 1,735,592
Land held for sale (Note 4) 1,545,184 1,673,168
Deferred assets (Notes 5, 6 and 7) 451,496 749,999
Property and equipment , net (Note 8) 835,485 1,437,227
Deferred income taxes (Note 9) 1,887,021 1,283,179
Other assets 2,190,451 1,730,023
------------ ------------
$ 37,752,513 $ 28,403,404
============ ============
Liabilities and Shareholders' Equity
Accounts payable $ 2,313,638 $ 1,581,659
Accrued and other liabilities 1,793,160 1,039,000
Genesis funds certificates (Note 4) 1,366,843 1,612,457
Due to affiliates (Notes 7, 12, and 16) 440,629 984,534
Deferred income (Note 6) 2,869 365,195
Notes payable (Note 10) 13,189,945 5,331,677
Notes payable to affiliates (Note 11) 1,837,912 2,000,584
------------ ------------
20,944,996 12,915,106
------------ ------------
Minority Interests (Note 12) 3,032,415 2,531,169
------------ ------------
Commitments (Note 13)
Shareholders' Equity (Notes 14 and 15)
Preferred stock, $10 par value;
10,000,000 shares authorized;
411,483 and 430,313 shares issued and
outstanding; liquidation preference of $4,114,830
and $4,303,130, respectively 1,515,134 1,648,755
Common stock, no par value;
40,000,000 shares authorized; 12,625,757
and 12,405,325 shares issued and outstanding 9,322,375 8,972,969
Treasury stock, at cost 20,000 shares (25,032) --
Additional paid in capital 35,190 30,000
Retained earnings 2,927,435 2,305,405
------------ ------------
13,775,102 12,957,129
------------ ------------
$ 37,752,513 $ 28,403,404
============ ============
See notes to consolidated financial statements
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Revenues: 1995 1994 1993
------------ ------------ ------------
Sales of timeshare interests $ 21,353,758 $ 18,713,970 $ 12,263,619
Resort operating revenue 8,868,344 8,764,558 8,072,260
Sales of land and other 1,856,947 2,472,141 123,500
------------ ------------ ------------
32,079,049 29,950,669 20,459,379
------------ ------------ ------------
Cost of sales and operating expenses:
Cost of timeshare interests sold 7,825,662 6,592,684 5,007,131
Cost of resort operations 9,354,382 7,807,857 6,962,849
Cost of land sold and other 1,664,971 1,955,631 113,618
Advertising and promotion 6,675,598 5,941,761 3,168,562
General and administrative 4,106,180 3,198,604 1,510,448
Provision for doubtful accounts 1,235,417 764,065 666,690
------------ ------------ ------------
30,862,210 26,260,602 17,429,298
------------ ------------ ------------
Operating income 1,216,839 3,690,067 3,030,081
Other income (expense):
Interest expense (Notes 10 and 11) (1,265,227) (666,141) (599,238)
Interest income 627,081 402,596 359,908
------------ ------------ ------------
(638,146) (263,545) (239,330)
------------ ------------ ------------
Income before income taxes 578,693 3,426,522 2,790,751
Income tax benefit 547,216 161,799 100,000
------------ ------------ ------------
Income before minority interests 1,125,909 3,588,321 2,890,751
Minority interests (Note 12) (501,246) (1,440,034) (814,520)
------------ ------------ ------------
Net income $ 624,663 $ 2,148,287 $ 2,076,231
============ ============ ============
Net income per common and
equivalent share $ 0.05 $ 0.17 $ 0.18
============ ============ ============
Number of common and equivalent shares 12,710,837 12,463,246 11,791,786
============ ============ ============
Net income per share assuming
full dilution $ 0.05 $ 0.17 $ 0.17
============ ============ ============
Number of fully diluted shares 13,198,287 12,971,235 12,301,206
============ ============ ============
See notes to consolidated financial statements
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Retained
Common Stock Additional Preferred Stock Earnings/ Treasury Stock
---------------------- Paid In ------------------- Accumulated ---------------
Shares Amount Capital Shares Amount Deficit Shares Amount Total
---------- ---------- ------- ------- ---------- ----------- ------ -------- -----------
Balances, December 31, 1992 11,268,098 $7,532,521 $30,000 132,943 $ 834,430 $(1,919,113) $ 6,477,838
Net income -- -- -- -- -- 2,076,231 2,076,231
Issuance of common stock for
acquisition 509,420 842,798 -- -- -- -- 842,798
Other issuance of common stock 306,100 306,030 -- -- -- -- 306,030
Issuance of preferred stock
for acquisition -- -- -- 305,652 842,798 -- 842,798
Exchange of preferred stock
for lodging certificates -- -- -- (420) (4,200) -- (4,200)
---------- ---------- ------- ------- ---------- ----------- ------ -------- -----------
Balances, December 31, 1993 12,083,618 8,681,349 30,000 438,175 1,673,028 157,118 10,541,495
Net income -- -- -- -- -- 2,148,287 2,148,287
Issuance of common stock for
acquisition 123,000 123,000 -- -- -- -- 123,000
Other issuance of common stock 24,616 29,232 -- -- -- -- 29,232
Exchange of preferred stock
for common stock 12,100 20,038 -- (7,260) (20,038) -- --
Exercise of options 162,586 121,135 -- -- -- -- 121,135
Exchange of preferred stock
for lodging certificates -- -- -- (245) (2,450) -- (2,450)
Exercise of cash options (595) (1,785) -- (357) (1,785) -- (3,570)
---------- ---------- ------- ------- ---------- ----------- ------ -------- -----------
Balances, December 31, 1994 12,405,325 8,972,969 30,000 430,313 1,648,755 2,305,405 12,957,129
Net income -- -- -- -- -- 624,663 624,663
Issuance of common stock for
acquisition 120,000 240,000 -- -- -- -- 240,000
Other issuance of common stock 86,100 86,212 -- -- -- -- 86,212
Exchange of preferred stock
for common stock 12,540 20,766 -- (7,524) (20,766) --
Issuance of cumulative shares for
dividend arrearage 1,857 2,613 -- -- -- (2,633) (20)
Exercise of options
Exchange of preferred stock
for lodging certificates -- -- 5,190 (11,267) (112,670) -- (107,480)
Exercise of cash options (65) (185) -- (39) (185) -- (370)
Acquisition of treasury shares -- -- -- -- -- -- (20,000) (25,032) (25,032)
---------- ---------- ------- ------- ---------- ----------- ------ -------- -----------
Balances, December 31, 1995 12,625,757 $9,322,375 $35,190 411,483 $1,515,134 $ 2,927,435(20,000)$(25,032) $13,775,102
================================================================================================
See notes to consolidated financial statements
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993
1995 1994 1993
------------ ------------ ------------
Cash flows from operating activities:
Net income $ 624,663 $ 2,148,287 $ 2,076,231
Adjustments to reconcile net income to
net cash provided by operating activities:
Undistributed minority interest 501,246 760,306 651,205
Deferred income taxes (603,842) (885,408) (297,771)
Additions to notes receivable (12,727,015) (10,333,377) (8,182,286)
Proceeds from sale of notes receivable 9,457,007 9,490,042 6,406,437
Provision for doubtful accounts 1,235,417 764,065 666,690
Depreciation and amortization 696,062 1,425,792 352,877
Amortization of guarantee fees 100,350 140,550 132,054
Change in assets and liabilities, net of the
effects from purchase of subsidiary:
(Increase) decrease in resort property held for timeshare sales (4,421,071) 870,858 (221,501)
Increase in resort property under development (417,680) (1,735,592) --
Decrease in land held for sale 127,984 1,440,765 --
(Increase) decrease in other assets (296,028) (862,965) 226,307
Increase (decrease) in accounts payable 731,979 (218,535) 241,931
Decrease in Genesis funds certificates (245,614) (568,559) --
Increase in accrued and other liabilities 646,681 569,187 187,762
Increase (decrease) in due to affiliates (543,905) 255,658 39,251
Increase (decrease) in deferred income (362,326) (91,704) 28,799
------------ ------------ ------------
Net cash (used in) provided by operating activities (5,496,092) 3,169,370 2,307,986
------------ ------------ ------------
Cash flows from investing activities:
(Increase) decrease in deferred assets 198,153 (353,251) (904,173)
Purchases of plant and equipment (60,965) (581,435) (741,323)
Net cash acquired from purchase of subsidiary -- -- 343,510
Net cash paid for Class A minority interest -- (371,250) --
------------ ------------ ------------
Net cash provided by (used in) investing activities 137,188 (1,305,936) (1,301,986)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 11,093,122 6,165,996 1,579,056
Proceeds from notes payable to affiliates 900,000 -- 850,000
Principal payments on notes payable (5,841,405) (6,006,073) (1,567,486)
Principal payments on notes payable to affiliates (742,672) (567,074) (820,265)
Proceeds from issuance of common stock 86,212 122,767 --
Proceeds from issuance of minority interest in subsidiary -- -- 300,000
Acquisition of treasury stock and other (25,422) (3,570) (3,120)
------------ ------------ ------------
Net cash provided by (used in) financing activities 5,469,835 (287,954) 338,185
------------ ------------ ------------
Net increase in cash and cash equivalents 110,931 1,575,480 1,344,185
Cash and cash equivalents at beginning of year 3,635,587 2,060,107 715,922
------------ ------------ ------------
Cash and cash equivalents at end of year $ 3,746,518 $ 3,635,587 $ 2,060,107
============ ============ ============
See notes to consolidated financial statements and supplemental schedules of noncash investing and financing activities
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental schedule of noncash investing and financing activities
for the year ended December 31, 1995:
Acquisition of resort property held for timeshare sales:
Increase in notes payable $ 1,300,000
Issuance of common stock 240,000
Increase in other assets (10,000)
Increase in resort property held for timeshare sales (1,580,000)
-----------
Net cash paid for resort property held for timeshare sales $ 50,000
===========
Purchase of resort property held for timeshare sales:
Increase in notes payable $ 507,726
Increase in resort property held for timeshare sales $ (507,726)
-----------
$ --
===========
Acquisition of resort property under development:
Increase in notes payable $ 701,400
Increase in resort property under development (1,002,000)
-----------
Net cash paid for resort property under development $ (300,600)
===========
Sale of property and equipment:
Decrease in property and equipment $ 500,000
Increase in other assets (180,000)
Decrease in notes payable (320,000)
-----------
$ --
===========
Purchases of plant and equipment
Increase in notes payable $ 97,424
Increase in property and equipment (97,424)
-----------
$ --
===========
Exchange of Series C Preferred Stock for common stock:
Issuance of common stock $ 20,766
Reduction in Series C Preferred Stock (20,766)
-----------
$ --
===========
Redemption of Series A Preferred Stock:
Issuance of certificates for room nights $ 107,480
Increase in paid in capital 5,190
Reduction in Series A Preferred Stock (112,670)
-----------
$ --
===========
See notes to consolidated financial statements
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental schedule of noncash investing and financing activities
for the year ended December 31, 1994:
Acquisition of Class A interest:
Increase in notes payable to affiliates $ 1,215,750
Reduction in minority interest (773,949)
Increase in resort property held for timeshare sales (813,051)
-----------
Net cash paid for Class A minority interest $ 371,250
===========
Purchases of plant and equipment
Increase in notes payable $ 364,948
Increase in plant and equipment (364,948)
-----------
--
===========
Purchase of minority interest in subsidiary:
Increase in other assets $ (123,000)
Increase in notes payable to affiliates 300,000
Issuance of common stock 123,000
Reduction in minority interest (300,000)
-----------
--
===========
Exchange of Series C Preferred Stock for common stock:
Issuance of common stock $ 20,038
Reduction in Series C Preferred Stock (20,038)
-----------
--
===========
Redemption of Series A Preferred Stock:
Issuance of certificates for room nights $ 2,450
Reduction in Series A Preferred Stock (2,450)
-----------
--
===========
Tax benefit on exercise of stock options
Increase in common stock $ 27,600
Reduction in taxes payable (27,600)
-----------
--
===========
See notes to consolidated financial statements
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental schedule of noncash investing and financing activities
for the year ended December 31, 1993:
Purchase of subsidiary:
Acquisition of notes receivable ($2,644,310)
Acquisition of land held for sale (2,345,902)
Acquisition of other assets (261,568)
Assumption of accounts payable 838,354
Assumption of Genesis funds certificates 2,162,943
Assumption of notes payable 502,486
Assumption of minority interest 402,791
Issuance of preferred stock 844,358
Issuance of common stock 844,358
-----------
Net cash acquired from
purchase of subsidiary $343,510
===========
Exchange of note for land:
Increase in land held for sale ($768,031)
Decrease in notes receivable 768,031
-----------
--
===========
Issuance of common stock for reduction of
Class A Priority return:
Issuance of common stock $204,000
Reduction in minority interest (204,000)
-----------
--
===========
Redemption of common stock to reduce
amounts due to affiliates:
Issuance of common stock $102,000
Reduction in due to affiliates (102,000)
-----------
--
===========
Redemption of Series A Preferred Stock:
Issuance of certificates for room nights $4,200
Reduction in Series A Preferred Stock (4,200)
-----------
--
===========
See notes to consolidated financial statements
ILX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation and Business Activities
The consolidated financial statements include the accounts of ILX Incorporated
and its wholly-owned and majority owned subsidiaries ("ILX" or the "Company").
All significant intercompany transactions and balances have been eliminated in
consolidation.
The Company's significant business activities include developing, operating,
marketing and financing ownership interests in resort properties located in
Arizona, Colorado, Florida, Indiana and Mexico. Effective in the third quarter
of 1994, the Company expanded its operations to include marketing of skin and
hair care products which are not considered significant to resort operations.
Net Income per Share
Net income per common share and common equivalent share is based on the weighted
average number of common shares outstanding, including common stock equivalents
which have a dilutive effect. Common stock equivalents consist of Series B
Convertible Preferred Stock, warrants and shares issuable under the stock option
plan (Notes 14 and 15). Net income per common share and common equivalent share
is based on net income adjusted for undeclared dividends on Series C Preferred
Stock. Net income per share assuming full dilution is based on the weighted
average number of common shares outstanding, including common stock equivalents,
and after giving effect to the conversion of Series C Preferred Stock.
Resort Property Held for Timeshare Sales
Resort property held for timeshare sales is recorded at the lower of historical
cost less amounts charged to cost of sales for timeshare sales and depreciation
provided for on the basis of daily rental occupancy, or market. As timeshare
interests are sold, the Company amortizes to cost of sales the average carrying
value of the property plus estimated future additional costs related to
remodeling and construction.
Land Held for Sale
Land held for sale is recorded at the lower of cost or estimated realizable
value, consistent with the Company's intention to liquidate these properties
(Note 4).
Revenue Recognition
Revenue from sales of timeshare interests is recognized in accordance with
Statement of Financial Accounting Standard No. 66, Accounting for Sales of Real
Estate ("SFAS No. 66"). No sales are recognized until such time as a minimum of
10% of the purchase price has been received in cash, the buyer is committed to
continued payments of the remaining purchase price and the Company has been
released of all future obligations for the timeshare interest. Resort operating
revenue represents daily room rentals and revenues from food and other resort
services. Such revenues are recorded as the rooms are rented or the services are
performed.
Property and Equipment
Property and equipment are stated at cost and are depreciated on the
straight-line method over their respective estimated useful lives ranging from 3
to 30 years. Property and equipment under capitalized leases are stated at fair
value as of the date placed in service, and amortized on the straight-line
method over the term of the lease or the estimated useful life, whichever is
shorter.
Statements of Cash Flows
Cash equivalents are highly liquid investments with an original maturity of
three months or less. During the years ended December 31, 1995, 1994 and 1993,
the Company paid interest of approximately $1,271,000, $716,000, and $503,000
and income taxes of approximately $221,000, $723,000 and $193,000 respectively.
Interest of $228,000 and $30,749 was capitalized during 1995 and 1994 to resort
property under development.
Accounting Matters
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121"), which is effective for fiscal years beginning
after December 15, 1995. The Company does not believe the adoption of SFAS 121
will have a significant impact on the Company's financial position, results of
operations, or cash flows.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which will be effective for the Company beginning January 1,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company intends to continue to apply APB Opinion No. 25
to its stock based compensation awards to employees and to disclose the required
pro forma effect on net income and earnings per share.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
The financial statements for prior periods have been reclassified to be
consistent with the 1995 financial statement presentation.
Note 2 - Notes Receivable
Notes receivable consist of the following:
December 31,
------------------------------
1995 1994
----------- ----------
Timeshare receivables $7,913,111 $5,243,443
Holdbacks by financial institutions 2,736,882 1,993,965
Genesis mortgage receivables (Note 4) 546,394 776,776
Allowance for possible credit losses (2,410,900) (1,263,288)
----------- ----------
$8,785,487 $6,750,896
=========== ==========
Notes generated from the sale of timeshare interests bear interest at annual
rates ranging from 9% to 16% and have terms of five to ten years. In addition,
the Company offers 0% interest and below market interest, and one and two year
financing, to purchasers who pay 50% of the purchase price at the time of sale.
These notes are discounted to yield a consumer market rate. The notes are
collateralized by deeds of trust on the timeshare interests sold.
The Company has agreements with financial institutions under which the Company
may sell certain of its notes receivable. These agreements provide for sales on
a recourse basis with a percentage of the amount sold held back by the financial
institution as additional collateral. At December 31, 1995 and 1994, the Company
had approximately $20 million and $15 million in outstanding notes receivable
sold on a recourse basis. Portions of the notes receivable are secured by second
deeds of trust on the Los Abrigados resort, the Golden Eagle Resort and Varsity
Clubs of America-Notre Dame. Notes may be sold at discounts to yield the
consumer market rate as defined by the financial institution.
At December 31, 1995, the Company had $13,000,000 in financing commitments
through September 1996, and an open ended arrangement expected to provide at
least $5,000,000 through 1996, to sell consumer notes receivable generated from
sales of timeshare interests at the Los Abrigados resort and the Golden Eagle
Resort. At December 31, 1995, approximately $7.7 million remained available on
the fixed commitment lines and $3 million on the open ended commitment. The
Company also has financing commitments whereby it may borrow up to $2.5 million
against notes receivable generated from sales of timeshare interests at the
Golden Eagle Resort and the Los Abrigados resort through September 1998.
Approximately $500,000 remained available on this commitment at December 31,
1995.
The Company has a $10 million financing commitment whereby the Company may sell
eligible notes received from sales of timeshare interests in Varsity Clubs of
America - Notre Dame on a recourse basis through March 1996. The commitment may
be extended for an additional eighteen month period and an additional $10
million at the option of the financing company. In March 1996, the financing
company verbally approved the extension and commenced preparation of written
documentation. Approximately $7.6 million was available under this commitment at
December 31, 1995.
The Company has a financing commitment whereby it may borrow up to $10 million
against conforming notes received from sales of timeshare interests in the
Kohl's Ranch Lodge through August 1997. Approximately $9.6 million was available
on this commitment at December 31, 1995.
In January 1992, the Company sold consumer notes receivable to affiliates of the
Company for proceeds of $368,000, consisting of $156,000 cash and the assignment
of Los Abrigados Limited Partners ("LAP") Class A priority returns, LAP Class B
limited partners interest payments and loan guarantee fees totaling $212,000.
The notes were sold with recourse and the Company recognized a loss of
approximately $60,000 on the sale. At December 31, 1995 and 1994, the Company
had approximately $181,000 and $304,000, respectively, in outstanding notes
receivable sold on a recourse basis to related parties.
During 1993, the Company borrowed $550,000 from affiliates of the Company,
collateralized by notes receivable with principal balances of approximately
$760,000 at the date of the borrowings. Balances outstanding on the borrowings
totaled $266,218 and $332,724 at December 31, 1995 and 1994, respectively (Note
11).
At December 31, 1995, notes receivable in the amount of approximately $370,000
have been contributed to the Company's Series A Preferred Stock sinking fund and
therefore their use is restricted (Note 14).
The reserve for possible credit losses of approximately $2,411,000 and
$1,263,000 at December 31, 1995 and 1994, reflect reserves for both notes sold
with recourse and notes retained.
Note 3 - Resort Property Held for Timeshare Sales
Resort property held for timeshare sales consists of the following projects:
December 31,
----------------------------
1995 1994
----------- ----------
Los Abrigados Resort $ 6,175,275 $6,846,715
Golden Eagle Resort 2,029,287 2,443,818
Kohl's Ranch Lodge 1,987,603 --
Varsity Clubs of America-Notre Dame 6,915,206 --
Costa Vida Resort 18,420 68,200
Ventura Resort 66,000 49,000
----------- ----------
$17,191,791 $9,407,733
=========== ==========
Resort properties are stated net of accumulated depreciation of $1,279,000 and
$878,000 at December 31, 1995 and 1994, respectively.
In September 1994, the Company acquired for $15,000 an option from an affiliate
to purchase 667 previously sold timeshare interests in the Los Abrigados resort.
The terms of the option agreement provide that the seller may sell to the
Company or the Company may acquire from the seller up to 25 intervals per month
and, in addition, up to one half of the remainder of the 667 intervals per year,
for $2,100 per interval. The seller must provide the Company with written notice
of its intent to sell 30 days in advance of a monthly sale and 180 days in
advance of an annual sale. The Company had purchased 150 intervals under this
option as of December 31, 1995.
In June 1995, the Company acquired the Kohl's Ranch Lodge, a ten acre rustic
resort near Payson, Arizona for a purchase price of $1,590,000, consisting of a
$50,000 cash down payment, assumption of an existing deed of trust of
approximately $932,250, issuance of a $367,750 second deed of trust to the
seller and the issuance of 120,000 shares of restricted common stock valued at
$2 per share. The Company commenced timeshare sales in July 1995.
In September 1995, the Company, through a subsidiary, entered into an agreement
to acquire a portion of the Hotel Syracuse in Syracuse, New York and to develop
and market timeshare interests in the property. The Company has a financing
commitment for $5 million in acquisition and development non-recourse financing,
which is expected to be sufficient to acquire and construct the suites, and $30
million in receivables financing through September 1998.
Note 4 - Genesis Investment Group, Inc.
On November 1, 1993, a wholly owned subsidiary of ILX consummated its merger
with and into Genesis Investment Group, Inc. ("Genesis") and, as a result,
Genesis, the surviving corporation, became a wholly owned subsidiary of ILX.
Under the terms of the merger agreement, the Company issued a unit consisting of
five shares of ILX common stock and three shares of Series C Convertible
Preferred Stock, with a par value of $10 per share, for each ten shares of
Genesis common stock. Each three shares of Series C Preferred Stock are
convertible after one year, at the option of the holder, into five shares of ILX
common stock. The merger agreement also provided that Genesis shareholders would
receive $3 per share for fractional units and Genesis shareholders who hold
fewer than 100 Genesis shares had the option to select cash of $3 per Genesis
share in lieu of ILX units.
On November 1, 1993, the date of the merger, ILX issued 101,988 units, the
maximum number of whole units that Genesis shareholders are entitled to under
the terms of the merger agreement, consisting of 305,964 shares of Series C
Preferred Stock recorded at $844,358 and 509,940 shares of ILX common stock
recorded at $844,358, and recorded a liability in the amount of $17,262 for
fractional units. As Genesis shareholders who own fewer than 100 shares elect
cash in lieu of units, the ILX Series C Preferred Stock and common stock are
reduced. During 1995 and 1994, Genesis shareholders elected to receive $370 and
$3,570 in cash, and, accordingly, Series C Preferred Stock and common stock were
each reduced by $185 and $1,785 respectively (Note 14).
The acquisition has been accounted for as a purchase with the cost allocated to
preferred and common shares based on the assumption that all preferred shares
are converted to common shares.
Genesis funds certificates arise from the reorganization of Genesis and
represent non-recourse liabilities. The holders are entitled to receive 50% of
the net proceeds from the sale of certain Genesis properties. Such amounts have
been recorded based upon the estimated realizable values of the related
properties and are increased for sales of property at prices higher than their
carrying values and for collection of mortgage interest and decreased for
payments to the certificate holders and for property expenses paid by Genesis
which reduce the amount payable to the certificate holders.
If the Company and Genesis had been combined as of January 1, 1993, the proforma
results of the combined entity would be as follows:
December 31,
1993
(Unaudited)
-----------
Total revenues $21,137,079
Net income $ 1,898,500
===========
Net income per common and
equivalent share $0.16
Net income per share assuming full dilution $0.15
===========
Note 5 - Red Rock Collection
In February 1993, the Company acquired, through a stock subscription offering,
71.4% of the issued and outstanding stock of Red Rock Collection Incorporated,
an Arizona Corporation ("RRC" or "Red Rock Collection"), in exchange for
$700,000 in goods and services to be provided to RRC at Los Abrigados resort. In
February 1994, the Company acquired the $300,000 minority interest in RRC, which
was held by affiliates, in exchange for 123,000 shares of restricted ILX common
stock valued at $1 per share and $300,000 in promissory notes (Notes 11 and 14).
Goodwill of $123,000 was recorded and is included, net of amortization of
$36,900 and $12,300, in other assets at December 31, 1995 and 1994,
respectively.
RRC was formed to market an exclusive line of skin and hair care products. Costs
were deferred until July 1994, the date at which sales commenced. Deferred costs
of approximately $929,000 were expensed in 1994.
Note 6 - Resort Property Under Development
Varsity Clubs of America Incorporated ("VCA") a wholly owned subsidiary of ILX,
intends to develop lodging accommodations in areas located near major university
campuses, and to market those lodging accommodations, including interval
ownership interests, to alumni and other sport enthusiasts. During 1994 VCA
acquired its first site near the University of Notre Dame and commenced
construction. Acquisition and construction costs totaling $1,735,592 are
included in resort property under development at December 31, 1994. Construction
of the facility was complete in August 1995 and at December 31, 1995, the
unamortized cost of the Notre Dame facility is included in resort property held
for sale. Revenues of $513,400, net of related selling costs of $148,205, were
deferred at December 31, 1994 and were recognized in 1995 when construction was
substantially complete.
In July 1995, the Company acquired for $1,002,000 a two acre site in Tucson,
Arizona, near the University of Arizona, to be the site of its second Varsity
Clubs of America. The Company made a down payment of $300,600 and the seller is
carrying the balance of $701,400 (Note 10).
Note 7 - Deferred Assets
December 31,
1995 1994
-------- --------
Deferred assets consist of the following:
Varsity Clubs of America loan fees and land deposits $ 91,946 $204,383
Guarantee fees 359,550 459,900
California Department of Real Estate registration costs -- 85,716
-------- --------
$451,496 $749,999
======== ========
As part of the acquisition of Los Abrigados resort, certain affiliates of the
Company guaranteed the underlying mortgage on the resort. As partial
consideration for their guarantee, the affiliates earned a $780,000 fee. The fee
is amortized to expense and is payable to the affiliates at the rate of $100 per
Los Abrigados timeshare interest sold with approximately one half the unpaid
balance due to one affiliate in December 1996, and the balance due to the other
affiliate in 1999. The amounts payable on the guarantee fee included in due to
affiliates at December 31, 1995 and 1994, are $390,951 and $536,501,
respectively.
As additional consideration for the guarantee, the affiliates are entitled to
receive a percentage of certain amounts held back on the sale of notes
receivable by a financial institution as collateral. The amount is to be paid as
the amounts held back are collected from the financial institution. At December
31, 1995 and 1994, notes receivable are shown net of $118,000 and $122,000,
respectively, related to this amount.
Note 8 - Property and Equipment
Property and equipment consists of the following:
December 31,
1995 1994
--------- ----------
Buildings and improvements $131,942 $ 640,933
Leasehold improvements 500,148 464,141
Furniture and fixtures 417,430 317,573
Office equipment 253,444 243,960
Computer equipment 151,105 140,188
--------- ----------
1,454,069 1,806,795
Accumulated depreciation (618,584) (369,568)
--------- ----------
$ 835,485 $1,437,227
========= ==========
Note 9 - Income Taxes
Deferred income tax assets (liabilities) included in the consolidated balance
sheet consist of the following:
December 31,
--------------------------
1995 1994
----------- ---------
Deferred Tax Assets:
Nondeductible accruals for uncollectible receivables $805,000 $588,000
Inventory costs capitalized for tax purposes 36,000 36,000
Tax basis in excess of book on resort property held for
timeshare sales 735,000 787,000
Book recognition of startup costs in excess of tax 281,000 354,000
Intangible assets capitalized for tax purposes 24,000 28,000
Minority interest allocation in excess of tax 238,000 219,000
Alternative minimum tax credit 56,000 74,000
Net operating loss carryforwards 1,439,000 1,052,000
Other 3,000 4,000
--------------------------
Total deferred tax assets 3,617,000 3,142,000
--------------------------
Deferred Tax Liabilities:
Installment receivable gross profit deferred for tax purposes (1,628,000) (1,018,000)
Tax amortization of loan fees in excess of book (102,000) (80,000)
---------------------------
Total deferred tax liabilities (1,730,000) (1,098,000)
---------------------------
Deferred Taxes 1,887,000 2,044,000
Valuation allowance -- (760,000)
--------------------------
Deferred Taxes -- Net $1,887,000 $1,284,000
==========================
A reconciliation of the income tax benefit and the amount that would be computed
using statutory federal and state income tax rates for the years ended December
31, is as follows:
1995 1994 1993
--------- ---------- ---------
Federal, computed on income before
minority interest and income taxes $197,000 $1,165,000 $ 949,000
Minority interest (170,000) (490,000) (277,000)
State, computed on income after
minority interest and before income taxes 58,000 119,000 118,000
Deferred tax adjustment 128,000 -- --
Decrease in valuation allowance (760,000) (956,000) (890,000)
-------- --------- ---------
Income tax benefit $(547,000) $ (162,000) $(100,000)
========= ========== =========
Tax benefits in 1993 resulted from decreases in the valuation allowance as a
result of the accelerated profitability of the Los Abrigados resort and the
related ability to utilize a portion of the net operating loss carryforwards and
built in losses. In 1993, a deferred tax asset was recorded to reflect the
future tax benefit of the Genesis net operating loss carryforwards and a
valuation allowance was recorded to offset the full amount of the asset. In
1994, due to the continued profitability of Los Abrigados, the improvement in
the Arizona real estate market and the development of tax strategies, which
include the acquisition by Genesis of timeshare interests in resort properties
that have historically been sold by the Company on a profitable basis, it was
concluded that more likely than not a portion of the Genesis net operating loss
carryforwards and the remainder of the Los Abrigados tax benefits would be
utilized. Accordingly, the valuation allowance was reduced in 1994. In 1995, due
to the continued expansion and profitability of timeshare activity it was
determined that the balance of the Genesis NOL's would be utilized and the
remaining valuation allowance was eliminated.
At December 31, 1995, ILX, excluding Genesis, had net operating loss ("NOL")
carryforwards of approximately $1,237,000 which expire in 2001 through 2011. At
December 31, 1995, Genesis had federal NOL carryforwards of approximately
$2,644,000 which expire in 2008 and state NOL carryforwards of $752,000 which
expire in 1998. The Genesis losses are limited as to usage because they arise
from built in losses of an acquired company and can only be utilized through
earnings of Genesis.
Note 10 - Notes Payable
Notes payable consist of the following: December 31,
------------------------
1995 1994
----------- ----------
Note payable, collateralized by deed of
trust on Los Abrigados resort, interest
at prime plus 1.25% (9.75% at
December 31, 1995), due through 1996 $ 805,000 $1,660,000
Note payable, collateralized by deed of trust
on Golden Eagle Resort, notes receivable,
and an assignment of the Company's
general partnership interest in LAP,
interest at 12%, due through 1998 1,549,990 639,916
Note payable, collateralized by notes receivable
and deed of trust on Golden Eagle Resort,
interest at prime plus 4% (12.5% at December
31, 1995), due through 1998 1,195,716 626,265
Note payable, collateralized by deed of trust on
Kohl's Ranch Lodge, interest at prime plus 1.25%
(9.75% at December 31, 1995), due through 1998 853,500 --
Note payable, collateralized by second deed of trust
on Kohl's Ranch Lodge, interest at 8%, due through 2000 334,800 --
Note payable, collateralized by notes receivable
and deed of trust on Kohl's Ranch Lodge,
interest at prime plus 4% (12.5% at December 31, 1995),
due through 2003 338,849 --
Note payable, collateralized by deed of trust on land in
Tucson, Arizona, interest at 9.75%, due through 1998 701,400 --
Note payable, collateralized by notes receivable
and deed of trust on Los Abrigados resort,
interest at prime plus 4% (12.5% at December 31, 1995),
due through 1998 246,828 423,700
$500,000 revolving line of credit, unsecured, interest at
prime plus 1.5% (10% at December 31, 1995), due 1996 -- 400,000
Construction note payable, collateralized by deed of trust
on Varsity Clubs of America - Notre Dame, interest at 13%,
due through 1998 4,186,869 400,784
$400,000 revolving line of credit, unsecured, interest
at prime plus 2% (10.5% at December 31, 1994), due 1996 145,000 350,000
Note payable, collateralized by RRC building, interest
at 8%, due through 1999 180,000 225,000
Note payable, collateralized by notes receivable, interest at
prime plus 2% (10.5% at December 31, 1995), due through 1997 160,841 --
Note payable, collateralized by deed of trust, interest
at 7.375%, due through 2001 63,701 72,272
Obligations under capital leases with interest at 9.5% to 14.7% (Note 17) 884,498 449,816
Other long-term commitment, advance rate at 12%, due through 2000 1,500,000 --
Other 42,953 38,476
Notes payable repaid during 1995 -- 45,448
----------- ----------
$13,189,945 $5,331,677
=========== ==========
In November 1995, the Company entered into a management agreement with one of
its timeshare lenders, with respect to the Los Abrigados resort. Pursuant to the
terms of the agreement the Lender will advance $3.5 million, provide strategic
planning and consultation with respect to timeshare sales of 3,500 Los Abrigados
intervals and reduce the holdback requirements on timeshare paper purchased by
the lender. The advance, plus a 12% cost of funds on the outstanding balance of
the advance, will be repaid in cash and in kind from one-half the monthly cash
flows from the sale of the 3,500 timeshare intervals. At December 31, 1995, the
lender had advanced $1.5 million on its commitment.
Future maturities of notes payable are as follows:
Year ending
December 31,
------------
1996 $3,923,503
1997 2,790,648
1998 5,284,514
1999 710,097
2000 477,089
Thereafter 4,094
-----------
$13,189,945
===========
Scheduled future maturities may be prepaid to the extent that payments made of
$1,000 per Los Abrigados timeshare interest, $2,180 per Varsity Clubs of
America-Notre Dame timeshare interest and $800 per Kohl's Ranch Lodge timeshare
interest sold exceed the scheduled payments on the loans. Any prepaid amounts
will be applied to the scheduled payments in chronological order of maturity.
Note 11 - Notes Payable to Affiliates
Notes payable to affiliates consist of the following:
December 31,
----------------------------
1995 1994
---------- ----------
Note payable, collateralized by LAP partnership
interest, interest at 8%, due through 1999 $927,868 $1,100,000
Note payable, collateralized by notes receivable,
interest at 14%, due through 1997 266,218 332,724
Note payable, collateralized by RRC common stock,
interest at 10%, due through 1997 63,826 225,426
Notes payable, collateralized by 320 timeshare interests
in Los Abrigados resort, interest at 10%, due
December 1999 580,000 --
Notes payable repaid during 1995 -- 342,434
---------- ----------
$1,837,912 $2,000,584
========== ==========
Future maturities of notes payable to affiliates are as follows:
Year ending
December 31,
------------
1996 $229,335
1997 219,648
1998 --
1999 1,388,929
----------
$1,837,912
==========
Total interest expense on notes payable to affiliates for the years ended
December 31, 1995, 1994 and 1993 was approximately $222,000, $141,000, and
$153,000.
Note 12 - Minority Interests
Minority interests at December 31, 1995, include interests in LAP, the Arizona
limited partnership which owns and operates the Los Abrigados resort, and
Genesis of $2,814,881 and $217,534, respectively (Note 4).
LAP minority interests consist of LAP's limited partners' capital contributions,
the limited partners' interests in the results of operations and cash
distributions to the limited partners. The Company held a 71% interest in LAP
until July 1, 1994, when it acquired the 7.5% Class A minority interest for
$1,587,000, and as a result, at December 31, 1994, holds a 78.5% interest.
Certain of the Class A partners are affiliates of the Company. Non-affiliates
received $365,250 in cash for their partnership interests and affiliates
received $6,000 cash and $1,215,750 in notes (Note 11). The cost in excess of
the minority interest balance at the date of acquisition was recorded as an
increase in resort property held for timeshare sales in the amount of $813,051.
The 21.5% remaining minority interest at December 31, 1995, is held by the Class
B limited partners whose capital contributions of $500,000 bear interest at
13.5%, payable quarterly.
Income from LAP is allocated; first, to the Class A limited partners until the
cumulative net profits allocated are equal to the cumulative Class A priority
return; then, 76.76% to ILX and 23.24% to the Class B limited partners until the
amounts allocated to the Class B limited partners equal their capital
contributions and; finally, to the partners pro rata in proportion to their
interests in the partnership. Effective July 1, 1994, 21.5% of income is
allocated to the Class B limited partners and 78.5% to ILX.
Included in due to affiliates at December 31, 1995 and 1994, is approximately
$17,000 and $17,000 in Class B interest.
A reconciliation of LAP minority interests from 1993 to 1995 is as follows:
Balance December 31, 1993 $2,136,338
Income allocated to Class A
and B Partners 1,204,263
Distributions paid or accrued (126,403)
Acquisition of Class A Partner interests (773,949)
----------
Balance December 31, 1994 2,440,249
Income allocated to Class B Partners 374,632
----------
Balance December 31, 1995 $2,814,881
==========
Note 13 - Commitments
Future minimum lease payments on noncancelable operating leases are as follows:
Year ending
December 31,
------------
1996 $362,000
1997 148,000
1998 36,000
1999 26,000
2000 6,000
--------
$578,000
========
Total rent expense for the years ended December 31, 1995, 1994 and 1993, was
approximately $490,000, $449,000, and $316,000.
Note 14 - Shareholders' Equity
Preferred Stock
At December 31, 1995 and 1994, preferred stock includes 66,011 and 77,278 shares
of the Company's Series A Preferred Stock carried at $660,110 and $772,780,
respectively. The Series A Preferred Stock has a par value and liquidation
preference of $10 per share and, commencing July 1, 1996, will be entitled to
annual dividend payments of $.80 per share. Commencing January 1, 1993, on a
quarterly basis, the Company must contribute $100 per timeshare interest sold in
the Los Abrigados resort to a mandatory dividend sinking fund. At December 31,
1995, notes receivable in the amount of approximately $370,000 have been
designated for the sinking fund. Dividends on the Company's common stock are
subordinated to the Series A dividends and to the contributions required by the
sinking fund.
At December 31, 1995 and 1994, preferred stock includes 55,000 shares of the
Company's Series B Convertible Preferred Stock carried at $55,000. The Series B
Convertible Preferred Stock has a $10 par value and a liquidation preference of
$10 per share, which is subordinate to the Series A liquidation preference. The
Series B Convertible Preferred Stock is not entitled to dividends. Commencing
July 1, 1996, the Series B Convertible Preferred Stock may be converted into
common stock on the basis of two shares of common for one share of preferred
stock.
Both the Series A and Series B preferred stock may, at the holder's election, be
exchanged under certain conditions for lodging certificates or, after payment of
$2,100 each, for Los Abrigados timeshare interests. The Company estimates that
the future cash obligations in respect to these in-kind redemptions is less than
$151,000.
At December 31, 1995 and 1994, preferred stock includes 290,472 and 298,035
shares of the Company's Series C Convertible Preferred Stock carried at $800,024
and $820,975, respectively (Note 4). The Series C Convertible Preferred Stock
has a $10 par value and is entitled to dividends at the rate of $.60 per share
per annum when declared by the Board of Directors. If dividends are not declared
in any year prior to the fifth anniversary of the merger date (November 1,
1993), such undeclared dividends ("Dividend Arrearage") may be converted to
"Cumulation Shares" at the rate of $6 of Dividend Arrearage per Cumulation
Share. The Series C Preferred Stock and the Cumulation Shares have a liquidation
preference of $10 per share and $6 per share, respectively, and are subordinate
to the liquidation preferences of the Series A and Series B stock. Commencing
November 1, 1994 through October 31, 2004, the Series C Preferred Stock may be
converted to ILX common stock on the basis of five shares of common stock for
three shares of Series C Preferred Stock and one share of ILX common stock for
each $6 in Dividend Arrearages. During 1995 and 1994, 7,524 and 7,260 Series C
convertible shares were exchanged for 12,540 and 12,100 common shares,
respectively. During 1995, 1,857 common shares were issued to exchanging
shareholders for their 1994 and 1995 dividend arrearage. ILX may redeem the
Series C Preferred Stock commencing November 1, 1996, at $10 per share plus
payment of all declared but unpaid dividends.
Common Stock
In March 1993, the Company issued 204,000 shares of restricted common stock,
valued at $1 per share, which was at a premium of $.25 over the approximate
market price at the date of issuance, to two LAP Class A minority partners in
consideration for the reduction of their Class A Priority return from 22% to
13.5%. The minority partners are affiliates of ILX.
In July 1993, the Company issued 102,000 shares of restricted common stock,
valued at $1 per share, which was at a discount of $.50 under the approximate
market price at the date of issuance, to a LAP Class B minority partner in
consideration for accrued and future guarantee fees and Class B interest. The
minority partner is an affiliate of ILX.
In July 1993, the Company issued warrants for 50,000 shares of ILX restricted
common stock exercisable at a price of $1.50 per share, the approximate market
value at date of issuance, in conjunction with the financing of refurbishment at
the Golden Eagle Resort (Note 10). The warrants are exercisable through July 1,
1998.
In February 1994, the Company issued 123,000 shares of restricted common stock,
valued at $1 per share, which was at a discount of a $.56 under the approximate
market price at the date of issuance, to the minority interest shareholders of
RRC (Note 5). The minority interest shareholders are affiliates of the Company.
In March 1994, the Company issued warrants for 100,000 shares of ILX restricted
common stock exercisable at a price of $1.625 per share, the approximate market
value at date of issuance. The warrants were issued in conjunction with the
early collection in March 1994, of a note receivable with a due date of December
31, 1997, in the amount of $900,000.
During 1994, 24,616 shares of restricted common stock valued at $29,232 were
issued in exchange for services provided to the Company. The stock was valued at
the approximate market price on the date of the agreement.
During 1995, the Company acquired 20,000 shares of its common stock for $25,037.
The acquired shares have been recorded as treasury stock.
During 1995, the Company granted 36,100 shares of restricted common stock valued
at $26,837, to employees in exchange for services provided.
Effective June 1995, the Company entered into a one year consulting agreement
for investor relations, broker relations and public relations services. In
exchange for the services to be provided, the Company issued 50,000 shares of
restricted common stock and will issue an additional 50,000 shares in 1996. The
shares have been valued at $1.1875 per share and the cost is being recognized
over a one year period. In addition, the Company granted options for 400,000
shares of common stock at $1.25 per share and 100,000 shares of common stock at
$1.625 per share. The options expire in June 1997.
In June 1995, the Company issued 120,000 shares of restricted common stock,
valued at $2 per share, which was the approximate market price at the date of
issuance, in conjunction with the acquisition of the Kohl's Ranch Lodge (Note
3).
Note 15 - Employee Stock Option Plan
The Company has adopted 1987, 1992 and 1995 Stock Option Plans pursuant to which
options (which term as used herein includes both incentive stock options and
non-statutory stock options) may be granted to key employees, including
officers, whether or not they are directors, and non-employee directors and
consultants, who are determined by the Board of Directors to have contributed in
the past, or who may be expected to contribute materially in the future, to the
success of the Company. The exercise price of the options granted pursuant to
the Plan shall be not less than the fair market value of the shares on the date
of grant. All outstanding stock options require the holder to have been a
director or employee of the Company for at least one year before exercising the
option. Options are exercisable over a five year period from date of grant if
the optionee was a ten percent or more shareholder immediately prior to the
granting of the option and over a ten-year period if the optionee was not a ten
percent shareholder. The aggregate number of shares which may be issued under
the Plans shall not exceed 1,341,376 shares.
Stock option transactions are summarized as follows:
Outstanding at December 31, 1992 331,336
Options granted 56,250
Options canceled (225,000)
--------
Outstanding at December 31, 1993 162,586
Options exercised (162,586)
Options granted 508,000
Options canceled (180,000)
--------
Outstanding at December 31, 1994 328,000
Options granted 550,000
Options canceled (5,000)
--------
Outstanding at December 31, 1995 873,000
========
The exercise price on the options exercised during 1994 was $.40 per share for
62,586 shares and $.685 for 100,000 shares. The exercise price for options
granted in 1995 ranged from $1.25 to $1.625 per share, for options granted in
1994 ranged from $1.625 to $2.00 per share, and for options granted in 1993 was
$.875 per share. The exercise price for options outstanding at December 31,
1995, ranged from $1.25 to $1.625 per share. Options outstanding at December 31,
1995, have expiration dates as follows:
Year Ending Options for
December 31, Shares
----------- ----------
1996 38,000
1997 500,000
1999 62,500
2000 50,000
2004 222,500
-------
873,000
=======
Note 16 - Related Party Transactions
In addition to the related party transactions described in notes 2, 3, 5, 7, 11,
12 and 14, the Company had the following related party transactions:
The Company leases from affiliates 41 timeshare interests in the Stonehouse at
Los Abrigados at the rate of $1,000 per time share unit per year, through
October 1, 1996, payable on a quarterly basis. The Company paid $41,000 per year
in lease payments to affiliates for the years ended December 31, 1995, 1994 and
1993. In addition, in 1993, the Company made lease payments to affiliates of
$52,424 for use of the Stonehouse for periods prior to 1992. The affiliates pay
maintenance fees to the Company on an annual basis for their ownership intervals
of $650 per interval in 1995, $375 per interval in 1994 and $345 per interval in
1993.
In March 1993, the Company exchanged two Stonehouse interests and twenty
one-bedroom timeshare interests in the Los Abrigados resort in satisfaction of
$70,000 in principal and accrued and future interest due on a note payable to an
affiliate. In June 1993, the Company upgraded six of the one-bedroom interests
to two-bedroom interests in exchange for an additional $6,000 principal
reduction.
In December 1994, the Company acquired a condominium adjacent to the Golden
Eagle Resort for $104,915, consisting of cash of $32,643 and the assumption of
the underlying mortgage of $72,272. The condominium is used to house the general
manager of the resort. Timeshare intervals in the property may be marketed in
the future.
In December 1995, in exchange for modification of the terms of the note payable
to the affiliate, the Company provided the affiliate with an option to convert,
at maturity, the $927,868 note balance into shares of ILX common stock at the
price of $2 per share (Note 11).
In December 1995, in exchange for modification of the terms of note payables to
affiliates, the Company provided the affiliates the option to convert, at
maturity, the $580,000 note balances into shares of ILX common stock at the
price of $2 per share (Note 11).
In December 1995, the Company sold its Red Rock Collection building to an
affiliate for $500,000. The purchase price consisted of a reduction in the
principal balance of the Company's note payable to the affiliate of $320,000 in
December 1995, and, in January 1996, payment by the affiliate of the $180,000
note secured by a deed of trust on the building (Note 10). The Company has
leased back the building for a one year term, with four one year options to
renew.
Note 17 - Capital Leases
Leased assets included in resort property held for timeshare sales and property
and equipment totaled $900,150 and $454,386 (net of accumulated amortization of
$227,527 and $454,386) at December 31, 1995 and 1994, respectively. The leases
expire through 2000. Future minimum lease payments at December 31 are as
follows:
1996 $ 322,964
1997 275,925
1998 219,614
1999 188,020
2000 83,406
---------
Total 1,089,929
Less amounts representing interest 205,431
---------
Net minimum lease payments $ 884,498
=========
Note 18 - Subsequent Events
In February 1996, the Company borrowed an additional $1,760,000 from the first
mortgage holder on the Los Abrigados resort and extended the maturity date to
June 1998 (Note 10).
In March 1996, the Company, through a subsidiary, became the managing general
partner of the partnership which owns the Lomacasi Resort in Sedona, Arizona, a
5.27 acre property approximately one mile from the Los Abrigados resort. The
Company acquired its partnership interest for a $25,000 capital contribution.
The resort is encumbered by the non-recourse deeds of trust on the property
totaling approximately $2.2 million, including accrued interest. The Company
intends to initially use the resort to provide lodging accommodations to
prospective timeshare purchasers at the Company's Sedona Sales Office. The
Company may offer timeshare interests in the resort in the future.
Note 19 - Quarterly Financial Data (Unaudited)
Quarterly financial information is presented in the following summary:
1995
----
Three months ended
----------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ---------- -----------
Revenues $6,836,797 $8,096,470 $8,410,608 $8,735,174
Operating income 819,623 1,193,613 326,287 (1,122,684)
Net income 402,565 644,621 492,913 (915,436)
Net income per share .03 .05 .04 (.07)
1994
----
Three months ended
----------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ---------- -----------
Revenues $6,334,998 $8,025,982 $8,196,292 $7,393,397
Operating income 1,173,947 1,347,869 1,167,184 1,067
Net income 721,183 804,682 469,056 153,366
Net income per share .06 .06 .04 .01
The reduced operating income and net income in the fourth quarter 1995 is due
primarily to write-offs of bond offering costs and VCA land deposits and
associated costs.
The reduced net income in the third quarter 1994 is due to recognition of income
taxes of $241,818.
The reduced operating income in the fourth quarter 1994 is due to amortization
of RRC deferred costs and recognition of VCA marketing costs (Notes 5 and 6).
Note 20 - Disclosures About Fair Values of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments". The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies. However, considerable judgment is necessarily required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange.
The carrying value of cash and cash equivalents, notes receivable, accounts
payable, notes payable and notes payable to affiliates are a reasonable estimate
of their fair value.
Signatures
Pursuant to the requirements of Section 13 of 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, there unto duly authorized, on the
27th day of March, 1996.
ILX Incorporated
(Registrant)
By Joseph P. Martori
-----------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Joseph P. Martori Chairman of the Board As of March 27, 1996
- -----------------------
Joseph P. Martori
/s/ Nancy J. Stone President, Chief Financial As of March 27, 1996
- ----------------------- Officer
Nancy J. Stone and Director
/s/ Denise L. Janda Vice President and Controller As of March 27, 1996
- -----------------------
Denise L. Janda
/s/ Edward J. Martori Director As of March 27, 1996
- -----------------------
Edward J. Martori
/s/ Ronald D. Nitzberg Director As of March 27, 1996
- -----------------------
Ronald D. Nitzberg
/s/ Luis C. Acosta Director As of March 27, 1996
- -----------------------
Luis C. Acosta
/s/ Steven R. Chanen Director As of March 27, 1996
- -----------------------
Steven R. Chanen
/s/ James W. Myers Director As of March 27, 1996
- -----------------------
James W. Myers
ILX INCORPORATED
SCHEDULE IX
RESERVE FOR POSSIBLE CREDIT LOSSES
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995
Charged
Balance at Charged to to Other Balance at
Beginning Costs and Accounts- Deductions- End of
of Period Expenses Describe Describe(a) Period
--------- -------- -------- -------- ------
Reserve for 1995 $1,263,000 1,235,000 -- 87,000 $2,411,000
possible credit ========== ========= ====== ======= ==========
losses
Reserve for 1994 $ 816,000 764,000 28,000(b) 345,000 $1,263,000
possible credit ========== ========= ====== ======= ==========
losses
Reserve for 1993 $ 692,000 667,000 -- 543,000 $ 816,000
possible credit ========== ========= ====== ======= ==========
losses
(a) Deductions represent the write-off of notes deemed uncollectible.
(b) Recoveries of prior year write-offs.
Exhibits
to
1995 Form 10-K
ILX INCORPORATED
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
- --- ----------- ----------------
3 (i)-1 Articles of Incorporation Incorporated by reference to
of International Leisure Exhibit 3-A of S-1
Enterprises Incorporated, No. 33-16122
filed October 8, 1986
3 (i)-2 Articles of Amendment to Incorporated by reference to
the Articles of Incorporation Exh. 3-C of 1990 10-K
of International Leisure
Enterprises Incorporated,
filed August 31, 1987
3 (i)-3 Articles of Amendment to Incorporated by reference to
the Articles of Incorporation Exh. 3 (i)-3 of 1994 10-K/A-3
of International Leisure
Enterprises Incorporated,
filed October 19, 1987
3 (i)-4 Articles of Amendment to the Articles Incorporated by reference to
of Incorporation of International Leisure Exh. 3 (i)-4 of 1994 10-K/A-3
Enterprises Incorporated, filed May 3, 1990
3 (i)-5 Articles of Amendment to the Articles Incorporated by reference to
of Incorporation of International Leisure Exh. 3-C(a) of 1993 10-K
Enterprises Incorporated (Changed by
this Amendment to ILX Incorporated),
filed June 28, 1993
3 (ii)-1Amended and Restated Bylaws of International Incorporated by reference to
Leisure Enterprises Incorporated, dated Exh. 3-D of 1990 10-K
October 26, 1987
4-1 Certificate of Designation, Preferences, Rights, Incorporated by reference to
and Limitations of Series A Preferred Stock, Exh. 10-81 of 1991 10-K
$10.00 par value of International Leisure
Enterprises Incorporated, filed September 5, 1991
4-2 Certificate of Designation, Preferences, Rights, Incorporated by reference to
and Limitations of Series B Preferred Stock, Exh. 10-82 of 1991 10-K
$10.00 par value of International Leisure
Enterprises Incorporated, filed September 5, 1991
4-3 Certificate of Designation of Series C Preferred Incorporated by reference to
Stock, filed April 30, 1993 Exh. 10-118 of 1993 10-K
10-1 1987 Stock Option Plan Incorporated by reference to
Exh. 10-1 of S-1
No. 33-16122
10-2 Form of Stock Option Agreement between Incorporated by reference to
International Leisure Enterprises Incorporated Exh. 10-2 of S-1
and Option Holder No. 33-16122
10-3 1992 Stock Option Plan Incorporated by reference to
Exh. 10-97 of 1992 10-K
10-4 1995 Stock Option Plan
10-5 Agreement to Purchase Series B Preferred Stock Incorporated by reference to
between Wm. Robert Burns and Paige Phillips Exh. 10-94 of 1992 10-K
Burns and International Leisure Enterprises
Incorporated, dated May 1, 1992
10-6 Agreement and Plan of Merger among ILE Incorporated by reference to
Acquisition Corporation, International Leisure Exh. 10-105 of 1992 10-K
Enterprises Incorporated and Genesis Investment
Group, Inc., dated March 15, 1993
10-7 First Amendment to Agreement and Plan of Incorporated by reference to
Merger between ILE Acquisition Corporation, Exh. 10-105 (a) of 1993 10-K
International Leisure Enterprises Incorporated
and Genesis Investment Group Inc., dated
April 22, 1993
10-8 Agreement among ILX Incorporated, Martori Enterprises
Incorporated, Los Abrigados Partners Limited Partnership,
Red Rock Collection Incorporated, Edward John Martori
and Joseph P. Martori as Trustee for Cynthia J. Polich
Irrevocable Trust dated June 1, 1989, dated December
29, 1995
10-9 All Inclusive Purchase Money Promissory Note Incorporated by reference to
Secured by All-Inclusive Purchase Money Deed Exh. 10-70 of 1994 10-K/A-3
of Trust to GPH Properties, Inc. from Red Rock
Collection Incorporated, dated January 18, 1994
10-10 Lease Agreement between Edward John Martori and Red
Rock Collection Incorporated, dated December 29, 1995
10-11 Stock Purchase Agreement between Martori Incorporated by reference to
Enterprises Incorporated and ILX Incorporated, Exh. 10-116 of 1993 10-K
dated December 30, 1993
(Red Rock Collection Incorporated)
10-12 Installment Promissory Note ($150,000) to Martori Incorporated by reference to
Enterprises Incorporated by ILX Incorporated, Exh. 10-15 of 1994 10-K/A-3
dated February 11, 1994
10-13 Stock Purchase Agreement between Alan R. Incorporated by reference to
Mishkin and Carol Mishkin, and ILX Incorporated, Exh. 10-117 of 1993 10-K
dated December 30, 1993
(Red Rock Collection Incorporated)
10-14 Installment Promissory Note ($150,000) to Alan Incorporated by reference to
R. Mishkin and Carol Mishkin by ILX Incorporated, Exh. 10-17 of 1994 10-K/A-3
dated February 11, 1994
10-15 First Amended Certificate of Limited Partnership Incorporated by reference to
and Amended Agreement of Los Abrigados Exh. 10-77 of 1991 10-K
Partners Limited Partnership, dated
September 9, 1991
10-16 Certificate of Amendment of Limited Partnership Incorporated by reference to
for Los Abrigados Partners Limited Partnership, Exh. 10-6 of 1994 10-K/A-3
dated November 11, 1993
10-17 Certificate of Amendment of Limited Partnership Incorporated by reference to
for Los Abrigados Partners Limited Partnership, Exh. 10-7 of 1994 10-K/A-3
dated July 1, 1994
10-18 First Amendment to Amended Agreement of
Los Abrigados Partners Limited Partnership,
dated February 9, 1996
10-19 Loan Agreement between The Steele Foundation, Incorporated by reference to
Inc., ILX Incorporated and Los Abrigados Partners Exh. 10-111 of 1993 10-K
Limited Partnership, dated July 21, 1993
10-20 Second Modification Agreement between ILX Incorporated by reference to
Incorporated, Los Abrigados Partners Limited Exh. 10-36 of 1994 10-K/A-3
Partnership, ILE Sedona Incorporated, and The
Steele Foundation, Inc., dated December 20, 1994
10-21 Assignment of Beneficial Interest under Promissory Incorporated by reference to
Note, Deed of Trust and Title Policy to Daniel Exh. 10-37 of 1994 10-K/A-3
Cracchiolo as Personal Representative of the Estate
of Ethel Steele by Genesis Investment Group,
Inc., dated June 17, 1994
10-22 Continuing Guaranty to Daniel Cracchiolo as Personal Incorporated by reference to
Representative of the Estate of Ethel Steele by ILX Exh. 10-38 of 1994 10-K/A-3
Incorporated, dated June 17, 1994
10-23 Purchase and Sale Agreement between Edward Incorporated by reference to
J. Martori, Martori Enterprises Incorporated, Exh. 10-8 of 1994 10-K/A-3
Jerome M. White, Guadalupe Iniguez (as Trustee),
Wedbush Morgan Securities (IRA), and Joseph
P. Martori (as Trustee) and ILX Incorporated,
dated July 1, 1994
10-24 Installment Promissory Note ($1,000,000) to Incorporated by reference to
Edward J. Martori by ILX Incorporated, dated Exh. 10-9 of 1994 10-K/A-3
July 1, 1994
10-25 Installment Promissory Note ($100,000) to Incorporated by reference to
Martori Enterprises Incorporated by ILX Exh. 10-10 of 1994 10-K/A-3
Incorporated, dated July 1, 1994
10-26 Amendment to Purchase and Sale Agreement Incorporated by reference to
between Edward J. Martori, Martori Enterprises Exh. 10-11 of 1994 10-K/A-3
Incorporated, Wedbush Morgan Securities
(IRA), and Joseph P. Martori (as Trustee) and
ILX Incorporated, dated January 3, 1995
10-27 Installment Promissory Note ($57,875) to Incorporated by reference to
Wedbush Morgan Securities (IRA) by ILX Exh. 10-12 of 1994 10-K/A-3
Incorporated, dated January 1, 1995
10-28 Installment Promissory Note ($57,875) to Incorporated by reference to
Joseph P. Martori (as Trustee) by ILX Exh. 10-13 of 1994 10-K/A-3
Incorporated, dated January 1, 1995
10-29 Agreement between BIS-ILE Associates, Arthur Incorporated by reference to
J. Martori and Alan R. Mishkin, dated Exh. 10-72 of 1990 10-K
March 28, 1991
10-30 Supplemental Agreement between BIS-ILE Incorporated by reference to
Associates, Arthur J. Martori and Alan R. Mishkin, Exh. 10-72 (a) of 1990 10-K
dated March 28, 1991
10-31 Guarantee Fee Agreement between Los Abrigados Incorporated by reference to
Partners Limited Partnership and Arthur J. Exh. 10-79 of 1991 10-K
Martori and Alan R. Mishkin, dated
September 9, 1991
10-32 License Agreement between Los Abrigados Incorporated by reference to
Partners Limited Partnership and those certain Exh. 10-83 of 1991 10-K
participants, dated September 1, 1991
10-33 Promissory Note ($900,000) to Cynthia J. Polich Irrevocable Incorporated by reference to
Trust and Edward John Martori by Los Abrigados Partners Exh. 10-1 9/30/95 10-Q/A
Limited Partnership and ILX Incorporated, dated July 27, 1995
10-34 Deed of Trust and Assignment of Rents to Cynthia J. Polich Incorporated by reference to
Irrevocable Trust and Edward John Martori by Los Abrigados Exh. 10-2 9/30/95 10-Q/A
Partners Limited Partnership, dated July 27, 1995
10-35 Financing Agreement between Martori Enterprises Incorporated by reference to
Incorporated and International Leisure Enterprises Exh. 10-91 of 1991 10-K
Incorporated, dated January 13, 1992
10-36 Financing Agreement between Martori Enterprises Incorporated by reference to
Incorporated and Los Abrigados Partners Limited Exh. 10-96 of 1992 10-K
Partnership, dated August 31, 1992
10-37 Financing and Security Agreement between Incorporated by reference to
Martori Enterprises Incorporated and International Exh. 10-109 of 1993 10-K
Leisure Enterprises Incorporated, dated
May 15, 1993
10-38 Secured Promissory Note and Security Agreement Incorporated by reference to
and Financing Statement between Martori Exh. 10-110 of 1993 10-K
Enterprises Incorporated and International
Leisure Enterprises Incorporated, dated
June 11, 1993
10-39 Real Estate Purchase Contract between Indian Incorporated by reference to
Wells Partners, Ltd., Los Abrigados Partners Exh. 10-98 of 1992 10-K
Limited Partnership and International Leisure
Enterprises Incorporated, dated December 18, 1992
10-40 Option Agreement between Indian Wells Partners, Incorporated by reference to
Ltd. and Martori Enterprises Incorporated, Exh. 10-29 of 1994 10-K/A-3
dated March 31, 1994
10-41 Assignment of Option by Martori Enterprises Incorporated by reference to
Incorporated to Genesis Investment Group, Inc., Exh. 10-30 of 1994 10-K/A-3
dated September 15, 1994
10-42 Lease Agreement between Indian Wells Partners, Incorporated by reference to
Ltd. and Los Abrigados Partners Limited Exh. 10-99 of 1992 10-K
Partnership, dated December 21, 1992
10-43 Second Amendment to Lease Agreement Incorporated by reference to
between Indian Wells Partners, Ltd. and Los Exh. 10-32 of 1994 10-K/A-3
Abrigados Partners Limited Partnership,
dated March 31, 1994
10-44 Warrant Agreement (50,000 Shares of Common Incorporated by reference to
Stock) between Lawrence S. Held and ILX Exh. 10-33 of 1994 10-K/A-3
Incorporated, dated March 31, 1994
10-45 Warrant Agreement (50,000 Shares of Common Incorporated by reference to
Stock) between Jerome M. White and ILX Exh. 10-34 of 1994 10-K/A-3
Incorporated, dated March 31, 1994
10-46 Loan Agreement ($5,000,000) between The Incorporated by reference to
Valley National Bank and Los Abrigados Exh. 10-76 of 1991 10-K
Partners Limited Partnership,
dated September 9, 1991
10-47 Modification Agreement ($5,000,000) between Incorporated by reference to
Bank One, Arizona, NA and Los Abrigados Exh. 10-114 of 1993 10-K
Partners Limited Partnership,
dated October 22, 1993
10-48 Second Modification Agreement ($5,000,000) Incorporated by reference to
between Bank One, Arizona, NA and Los Exh. 10-43 of 1994 10-K/A-3
Abrigados Partners Limited Partnership,
dated October 4, 1994 additional advance
including repayment of prior $750,000 loan)
10-49 Third Modification Agreement ($5,000,000)
between Bank One, Arizona, NA and Los
Abrigados Partners Limited Partnership,
dated January 25, 1996 (additional advance)
10-50 Secured Promissory Note ($2,485,000) to Bank
One, Arizona, NA by Los Abrigados Partners
Limited Partnership, dated January 25, 1996
10-51 Letter of Commitment between Tammac Financial Incorporated by reference to
Corp. and Los Abrigados Partners Limited Exh. 10-52 of 1994 10-K/A-3
Partnership, dated July 20, 1994
10-52 Financing Agreement between Tammac Financial Incorporated by reference to
Corp. and Los Abrigados Partners Limited Exh. 10-88 of 1991 10-K
Partnership, dated September 10, 1991
10-53 Amendment to Commitment Letter, Financing Incorporated by reference to
Agreement and Reaffirmation of Various Loan Exh. 10-88 (a) of 1993 10-K
Documents between Tammac Financial
Corp., Los Abrigados Partners Limited
Partnership and International Leisure Enterprises
Incorporated, dated March 31, 1993
10-54 Third Amendment to Financing Agreement between Incorporated by reference to
Tammac Financial Corp. and Los Abrigados Exh. 10-55 of 1994 10-K/A-3
Partners Limited Partnership, dated September 7, 1994
10-55 Amended and Restated Continuing Guaranty to Incorporated by reference to
Tammac Financial Corporation by ILX Incorporated, Exh. 10-56 of 1994 10-K/A-3
dated September 7, 1994
10-56 Loan and Security Agreement between Tammac Incorporated by reference to
Financial Corp. and Los Abrigados Partners Exh. 10-53 of 1994 10-K/A-3
Limited Partnership, dated September 7, 1994
10-57 Promissory Note ($499,859.15) to Tammac Financial Incorporated by reference to
Corp. by Los Abrigados Partners Limited Partnership, Exh. 10-54 of 1994 10-K/A-3
dated September 7, 1994
10-58 Contract of Sale of Membership Agreements and Incorporated by reference to
Installment Purchase Agreements with Recourse Exh. 10-112 of 1993 10-K
between Resort Funding, Inc. and Los Abrigados
Partners Limited Partnership, dated
September 14, 1993
10-59 Management Agreement between Bennett Funding Incorporated by reference to
International, Ltd. and Los Abrigados Partners Limited Exh 10 (c) S-2 No. 33-61477
Partnership, ILE Sedona Incorporated, and ILX Incorporated
dated November 21, 1995 (Los Abrigados Resort)
10-60 Promissory Note ($255,000) to Firstar Metropolitan Bank
& Trust from Los Abrigados Partners Limited Partnership
and ILX Incorporated, dated April 28, 1995
10-61 Financing Agreement ($255,000) between Firstar
Metropolitan Bank & Trust and Los Abrigados Partners
Limited Partnership and ILX Incorporated,
dated September 10, 1991
10-62 Promissory Note to Firstar Metropolitan Bank Incorporated by reference to
and Trust from Los Abrigados Partners Limited Exh. 10-115 of 1993 10-K
Partnership, dated November 8, 1993
10-63 Change in Terms Agreement ($400,000) between Incorporated by reference to
Los Abrigados Partners Limited Partnership and Exh. 10-49 of 1994 10-K/A-3
Firstar Metropolitan Bank and Trust, dated
November 8, 1994
10-64 Change in Terms Agreement ($400,000) between
Los Abrigados Partners Limited Partnership and
Firstar Metropolitan Bank and Trust, dated
November 8, 1995
10-65 Agreement for Purchase and Sale of Kohl's Incorporated by reference to
Ranch between Kohl's Ranch Associates and Exh. 10-74 of 1994 10-K/A-3
ILX Incorporated, dated March 10, 1995 Exh. 10-1 6/30/95 10-Q/A-2
(Kohl's Ranch)
10-66 Promissory Note ($367,750) to Kohl's Ranch Associates Incorporated by reference to
by ILX Incorporated, dated June 1, 1995 (Kohl's Ranch) Exh. 10-2 6/30/95 10-Q/A-2
10-67 Fourth Modification Agreement and Assumption Agreement Incorporated by reference to
between Bank One, Arizona, NA and ILX Incorporated Exh. 10-4 6/30/95 10-Q/A-2
dated June 1, 1995 (Kohl's Ranch)
10-68 Letter of Commitment between Tammac Financial Corp. Incorporated by reference to
and ILX Incorporated, dated June 19, 1995 (Kohl's Ranch) Exh. 10-5 6/30/95 10-Q/A-2
10-69 Promissory Note ($10,000,000) to Tammac Financial Corp. Incorporated by reference to
by ILX Incorporated, dated August 25, 1995 (Kohl's Ranch) Exh. 10-3 9/30/95 10-Q/A
10-70 Loan and Security Agreement between Tammac Financial Corp. Incorporated by reference to
and ILX Incorporated, dated August 25, 1995 (Kohl's Ranch) Exh. 10-4 9/30/95 10-Q/A
10-71 Letter of Commitment between Tammac Financial Incorporated by reference to
Corp. and ILX Incorporated, dated July 20, 1994 Exh. 10-57 of 1994 10-K/A-3
(Golden Eagle Resort)
10-72 Loan and Security Agreement between Tammac Incorporated by reference to
Financial Corp. and ILX Incorporated, dated Exh. 10-58 of 1994 10-K/A-3
September 7, 1994
(Golden Eagle Resort)
10-73 Promissory Note ($2,000,000) to Tammac Incorporated by reference to
Financial Corp. by ILX Incorporated, dated Exh. 10-59 of 1994 10-K/A-3
September 7, 1994
(Golden Eagle Resort)
10-74 Amended and Restated Financing Agreement Incorporated by reference to
between Tammac Financial Corp. and ILX Exh. 10-60 of 1994 10-K/A-3
Incorporated, dated September 7, 1994
(Golden Eagle Resort)
10-75 Option Agreement between Imperial Properties and Incorporated by reference to
ILX Incorporated, dated July 25, 1994 Exh. 10-71 of 1994 10-K/A-3
10-76 Joint Venture Agreement between Chanen Incorporated by reference to
Development Company, Inc. and ILE Sedona Exh. 10-72 of 1994 10-K/A-3
Incorporated, dated September 28, 1994
10-77 First Amended Certificate of Limited Partnership and
Amended Agreement of The Sedona Real Estate Limited
Partnership #1, dated March 1, 1996 (Lomacasi Resort)
10-78 Letter Agreement dated February 27, 1996 (Lomacasi Resort)
10-79 Letter of Commitment between Bennett Funding Incorporated by reference to
International, Ltd. and VCA South Bend Incorporated, Exh. 10-62 of 1994 10-K/A-3
dated August 18, 1994
10-80 Construction Loan Agreement between Bennett Funding Incorporated by reference to
International, Ltd. and VCA South Bend Incorporated, Exh. 10-63 of 1994 10-K/A-3
dated October 4, 1994
10-81 Construction Promissory Note ($5,000,000) to Bennett Incorporated by reference to
Funding International, Ltd. by VCA South Bend Exh. 10-64 of 1994 10-K/A-3
Incorporated, dated October 4, 1994
10-82 Guaranty and Subordination Agreement (Construction Incorporated by reference to
Loan) to Bennett Funding International, Ltd. by Exh. 10-65 of 1994 10-K/A-3
ILX Incorporated, dated August 18, 1994
10-83 Contract of Sale of Timeshare Receivables with Incorporated by reference to
Recourse between Bennett Funding International, Exh. 10-66 of 1994 10-K/A-3
Ltd. and VCA South Bend Incorporated, dated
August 18, 1994
10-84 Guaranty and Subordination Agreement (Receivables Incorporated by reference to
Financing) to Bennett Funding International, Ltd. by Exh. 10-67 of 1994 10-K/A-3
ILX Incorporated, dated August 18, 1994
10-85 Standard Form of Agreement between Owner and Incorporated by reference to
Contractor between Walton Constuction Company, Exh. 10-73 of 1994 10-K/A-3
Inc. and VCA South Bend Incorporated, dated
October 10, 1994
10-86 Contract for Sale between City of Tucson and ILX Incorporated by reference to
Incorporated, dated June 16, 1995 Exh. 10-6 6/30/95 10-Q/A-2
10-87 Assignment of Contract for Sale from ILX Incorporated to Incorporated by reference to
VCA Tucson Incorporated, dated July 17, 1995 Exh. 10-7 6/30/95 10-Q/A-2
10-88 Articles of Limited Partnership between Hotel Syracuse Incorporated by reference to
Timeshare Corporation and Syracuse Project Incorporated, Exh. 10-6 9/30/95 10-Q/A
dated August 15, 1995
10-89 Agreement of Purchase and Sale of Real Property, Incorporated by reference to
Improvements and Associated Personalty between Hotel Exh. 10-7 9/30/95 10-Q/A
Syracuse, Inc. and Orangemen Club Limited Partnership,
dated September 12, 1995
10-90 Letter of Commitment between Resort Service Company, Inc. Incorporated by reference to
and Orangemen Club Limited Partnership, dated August 9, 1995 Exh. 10-5 9/30/95 10-Q/A
10-91 Service Agreement between Hotel Syracuse, Inc. and Incorporated by reference to
Orangemen Club Limited Partnership, Exh. 10-8 9/30/95 10-Q/A
dated September 12, 1995
10-92 Loan Agreement ($500,000) between Bank One, Incorporated by reference to
Arizona, NA and ILX Incorporated, Exh. 10-46 of 1994 10-K/A-3
dated October 4, 1994
10-93 Modification Agreement ($500,000) between Bank One,
Arizona, NA and ILX Incorporated, dated October 4, 1995
10-94 Promissory Note ($500,000) to Bank One, Incorporated by reference to
Arizona, NA by ILX Incorporated, dated Exh. 10-47 of 1994 10-K/A-3
October 4, 1994
10-95 Consulting Agreement between Investor Resource Incorporated by reference to
Services, Inc. and ILX Incorporated Exh. 10 (a) S-2 No. 33-61477
10-96 Consulting Agreement between Universal Solutions, Inc. Incorporated by reference to
and ILX Incorporated Exh 10 (b) S-2 No. 33-61477
21-1 List of Subsidiaries of ILX Incorporated
27-1 The Registrant's 1995 Financial Data Schedule