SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended September 30, 1997 Commission File Number 001-13855
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ILX RESORTS INCORPORATED
------------------------
(Exact name of registrant as specified in its charter)
ARIZONA 86-0564171
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2111 East Highland Avenue, Suite 210, Phoenix, Arizona 85016
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(Address of principal executive offices)
Registrant's telephone number, including area code 602-957-2777
---------------------------------------------
Former name, former address, and former fiscal year, if changed since last
report.
ILX INCORPORATED
The undersigned registrant hereby amends its Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1997, as follows:
Part I, Items 1 and 2 are hereby amended to read in their entirety, as
follows:
Part I
Item 1. Financial Statements
ILX RESORTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
---- ----
(Unaudited)
Assets
Cash and cash equivalents $ 2,218,261 $ 3,523,047
Notes receivable, net 15,933,418 11,745,720
Resort property held for Vacation Ownership Interest sales 14,230,827 15,247,587
Resort property under development 1,727,833 1,209,706
Land held for sale 1,551,065 1,547,493
Deferred assets 313,813 313,346
Property and equipment, net 5,182,104 4,877,467
Deferred income taxes 764,449 1,178,653
Other assets 1,938,462 1,631,886
---------------- ----------------
$ 43,860,232 $ 41,274,905
================ ================
Liabilities and Shareholders' Equity
Accounts payable $ 1,919,757 $ 2,310,600
Accrued and other liabilities 2,976,446 4,658,222
Due to affiliates 41,336 139,715
Notes payable 19,250,677 14,867,096
Notes payable to affiliates 3,110,106 1,567,287
---------------- ----------------
27,298,322 23,542,920
---------------- ----------------
Minority Interests -- 2,556,865
---------------- ----------------
Shareholders' Equity (Note 1)
Preferred stock, $10 par value; 10,000,000 shares authorized; 380,468 and
392,109 shares issued and outstanding; liquidation preference of
$3,804,680 and $3,921,090, respectively 1,384,891 1,419,243
Common stock, no par value; 30,000,000 shares authorized; 2,692,433 and
2,604,858 shares issued and outstanding 10,275,111 9,788,738
Treasury stock, at cost, 6,100 and 6,000 shares, respectively (37,099) (36,536)
Additional paid in capital 79,450 78,300
Retained earnings 4,859,557 3,925,375
---------------- ----------------
16,561,910 15,175,120
---------------- ----------------
$ 43,860,232 $ 41,274,905
================ ================
See notes to consolidated financial statements
2
ILX RESORTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Timeshare revenues:
Sales of Vacation Ownership Interests $ 6,812,548 $ 5,480,153 $ 17,750,423 $ 15,270,596
Resort operating revenue 2,770,829 2,713,317 8,000,593 7,996,778
Interest income 414,482 248,532 973,236 712,628
--------------- ---------------- --------------- ----------------
Total timeshare revenues 9,997,859 8,442,002 26,724,252 23,980,002
--------------- ---------------- --------------- ----------------
Cost of sales and operating expenses
Cost of Vacation Ownership Interests sold 852,314 669,884 2,369,296 2,311,644
Cost of resort operations 2,672,365 2,598,017 7,938,745 7,924,836
Sales and marketing 4,095,069 2,876,500 10,237,066 7,817,019
General and administrative 703,731 653,594 2,003,106 1,613,644
Provision for doubtful accounts 208,759 36,410 526,352 459,143
Depreciation and amortization 137,494 70,396 345,145 543,643
--------------- ---------------- --------------- ----------------
Total cost of sales and operating
expenses 8,669,732 6,904,801 23,419,710 20,669,929
--------------- ---------------- --------------- ----------------
Timeshare operating income 1,328,127 1,537,201 3,304,542 3,310,073
---------------- ---------------- --------------- ----------------
Land and other business
Sales of land and other 12,982 30,017 67,563 331,615
Cost of land sold and other 5,981 31,160 50,978 291,017
--------------- ---------------- --------------- ----------------
Income (loss) from land and other business 7,001 (1,143) 16,585 40,598
--------------- ----------------- --------------- ----------------
Total operating income 1,335,128 1,536,058 3,321,127 3,350,671
Interest expense 564,710 478,962 1,500,472 1,406,073
--------------- --------------- --------------- -----------------
Income before minority interests and
income taxes 770,418 1,057,096 1,820,655 1,944,598
Minority interests (9,554) (204,303) (178,307) (486,469)
Income taxes (303,845) (354,006) (656,302) (607,371)
---------------- ----------------- ------------------ -----------------
Net income $ 457,019 $ 498,787 $ 986,046 $ 850,758
=============== ================ =============== ================
Net income per common and equivalent share
$ 0.17 $ 0.19 $ 0.37 $ 0.33
=============== ================ ============== ================
Number of common and equivalent shares
2,682,732 2,602,674 2,651,535 2,578,007
=============== ================ =============== ================
See notes to consolidated financial statements
3
ILX RESORTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
-------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 986,046 $ 850,758
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed minority interest 178,032 239,258
Provision for doubtful accounts 526,352 459,143
Depreciation and amortization 345,145 543,643
Deferred income taxes 414,204 735,150
Amortization of guarantee fees 67,150 56,300
Change in assets and liabilities:
Decrease in resort property held for Vacation Ownership Interest sales 1,016,760 485,381
Additions to resort property under development (518,127) (65,269)
Increase in land held for sale (3,572) (2,309)
Increase in other assets (11,637) (198,852)
Decrease in accounts payable (390,843) (141,757)
Increase (decrease) in accrued and other liabilities 455,444 (191,012)
Decrease in due to affiliates (98,379) (240,863)
----------------- ----------------
Net cash provided by operating activities 2,966,575 2,529,571
----------------- ----------------
Cash flows from investing activities:
(Increase) decrease in deferred assets (67,617) 66,050
Purchases of plant and equipment, net (492,988) (242,465)
Notes receivable, net (4,429,967) (3,123,123)
Net cash paid for minority interest (820,000) --
----------------- ----------------
Net cash used in investing activities (5,810,572) (3,299,538)
----------------- -----------------
Cash flows from financing activities:
Proceeds from notes payable 6,208,386 4,181,139
Principal payments on notes payable (4,374,662) (3,826,898)
Principal payments on notes payable to affiliates (202,181) (339,350)
Distributions to minority partners (140,000) (720,000)
Proceeds from issuance of common stock 96,125 423,875
Acquisition of treasury stock (563) --
Redemption of preferred stock -- (12,000)
Preferred stock dividend payments (47,894) (47,971)
----------------- -----------------
Net cash provided by (used in) financing activities 1,539,211 (341,205)
----------------- -----------------
Net decrease in cash and cash equivalents (1,304,786) (1,111,172)
Cash and cash equivalents at beginning of period 3,523,047 3,746,518
----------------- ----------------
Cash and cash equivalents at end of period $ 2,218,261 $ 2,635,346
================= ================
See notes to consolidated financial statements
4
ILX RESORTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation and Business Activities
- ---------------------------------------------------
The Company's significant business activities include developing, operating,
marketing and financing Vacation 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.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable presentation
have been included and are of a normal recurring nature. Operating results for
the three and nine month periods ended September 30, 1997, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. The accompanying financial statements should be read in conjunction with
the Company's most recent audited financial statements.
The consolidated financial statements include the accounts of ILX Resorts
Incorporated and its wholly owned and majority-owned subsidiaries ("ILX" or the
"Company"). All significant intercompany transactions and balances have been
eliminated in consolidation.
Reverse Stock Split
- -------------------
On January 9, 1998, the Company's shareholders approved an amendment to the
Company's Articles of Incorporation to effect a one-for-five reverse stock split
of the Company's issued and outstanding shares of common stock. The reverse
stock split became effective as of 5:00 p.m. Mountain Standard Time on January
12, 1998. The reverse stock split has been retroactively reflected in the
accompanying financial statements.
Revenue Recognition
- -------------------
Revenue from sales of Vacation Ownership 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 Vacation Ownership 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.
Statements of Cash Flows
- ------------------------
Cash equivalents are highly liquid investments with an original maturity of
three months or less. During the three and nine month periods ended September
30, 1997 and 1996, the Company paid
5
interest and income taxes and capitalized interest to resort property under
development as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
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1997 1996 1997 1996
---- ---- ---- ----
Interest $ 627,079 $ 497,975 $ 1,546,751 $ 1,376,891
Income Taxes $ -- $ 2,000 $ -- $ 2,000
Interest Capitalized $ 54,020 $ 19,859 $ 140,006 $ 53,958
Reclassifications
- -----------------
The financial statements for prior periods have been reclassified to be
consistent with the 1997 financial statement presentation.
Note 2 - Notes Payable
In June 1997, the Company negotiated a settlement agreement for the 1996 breach
by a timeshare lender of a 1995 management agreement between the lender and the
Company. Under the management agreement, the lender committed to advance $3.5
million, but failed to fund $1.1 million of this amount. The settlement
agreement provides for repayment of the outstanding advances through a note
payable in the amount of $2.4 million. The note bears interest commencing July
1, 1997, at 12% per annum, payable monthly. Commencing July 1, 1998, principal
is payable through release payments upon the sale of certain Vacation Ownership
Interests. Any outstanding principal and interest is due in full on December 31,
2002. The note is secured by 200,000 shares of ILX stock pledged by an affiliate
of the Company, for which the affiliate will receive a guarantee fee. The
settlement agreement also includes the termination of the management agreement
(which included a profit sharing arrangement), the commitment by the lender to
advance an additional $550,000, bringing the total commitment to $6,550,000, for
the construction of Varsity Clubs of America - Tucson, as well as a reduction in
interest rate to 12% (from 13%) on the Varsity Clubs of America - Tucson
construction note, and the addition of a fee of $100 per annual Varsity Clubs of
America - Tucson Vacation Ownership Interest sold.
In June 1997, the Company entered into an agreement with one of its timeshare
lenders whereby the Company may borrow up to $5 million against consumer notes
from sales of Vacation Ownership Interests in Kohl's Ranch Lodge and, in
addition, whereby the Company in July 1997 borrowed $1.5 million, secured by a
first position deed of trust on Kohl's Ranch Lodge. The existing first deed of
trust on Kohl's Ranch Lodge of $444,500 was repaid in full in conjunction with
the new financing. The $1.5 million borrowing bears interest at prime plus 4%,
interest payable monthly and principal payable through release payments as
Vacation Ownership Interests are sold, with a minimum principal payment of
$80,000 due per quarter, and the balance due in full June 27, 2000. Borrowings
against the $5 million commitment for timeshare paper bear interest at prime
plus 3.25% and are secured by the consumer notes.
In July 1997, the Company borrowed $598,500 from one of its timeshare lenders to
purchase 285 Vacation Ownership Interests in Los Abrigados Resort & Spa. The
Vacation Ownership Interests were acquired for approximately $567,000, including
closing costs, under an option agreement whereby the Company had both the option
and under certain circumstances the obligation to purchase up to 667 Vacation
Ownership Interests at a cost of $2,100 per Interest. The July purchase was made
at a negotiated rate that was less than the amount specified in the option
agreement. Following this transaction, 107 Vacation Ownership Interests remain
subject to the option. The borrowing is secured by the 285 Vacation Ownership
Interests and bears interest at
6
prime plus 4%, with a 13% maximum rate. Interest is payable monthly and
principal is payable in quarterly installments of $25,000 through September
2000.
In September 1997, the Company borrowed an additional $800,000 from the first
mortgage holder on the Los Abrigados Resort & Spa and extended the maturity date
of the borrowing to April 1999.
During the third quarter of 1997, the Company borrowed $1,309,269 on its
$6,550,000 construction financing commitment for the Varsity Clubs of America -
Tucson facility, bringing the balance outstanding on the loan to $1,609,269 at
September 30, 1997.
During the first nine months of 1997, the Company borrowed $1,651,427 against
consumer notes receivable and also borrowed on its lines of credit, of which
$200,000 was outstanding at September 30, 1997.
During the second quarter of 1997, property and equipment of $97,181 was leased
and a vehicle was financed for $29,450.
Note 3 - Notes Payable to Affiliates
In July 1997, the Company issued 36,800 shares of its restricted common stock,
which were subsequently registered with the Securities and Exchange Commission,
in exchange for a $230,000 note payable to an affiliate. In conjunction with the
exchange, 100 Vacation Ownership Interests in Los Abrigados Resort & Spa, which
secured the note, were released.
In August 1997, the Company acquired the Class B Limited Partnership Interest in
LAP, for a purchase price of $2,920,000, consisting of cash payments of
$820,000, the issuance of 20,000 shares of the Company's common stock valued at
$6.25 per share and the issuance of promissory notes in the amount of $1,300,000
and $675,000. The $1,300,000 note payable, secured by the Company's 10% Class B
Limited Partnership Interest in Los Abrigados, bears interest at 8%, with
principal of $100,000 payable on or before January 1, 1998 and principal and
interest payable in annual installments of $200,000 commencing July 31, 1998,
with any unpaid principal and interest due July 31, 2002. Interest from August
8, 1997 through January 1, 1998 will be added to principal on December 31, 1997.
The $675,000 note payable, secured by the Company's 11.5% Class B Limited
Partnership Interest in Los Abrigados, bears interest at 8%, with principal and
interest payable in annual installments of $100,000 commencing July 31, 1998,
with any unpaid principal and interest due July 31, 2002. The purchase was
recorded as follows:
Increase in notes payable to affiliates $ 1,975,000
Issuance of common stock 125,000
Increase in other assets (6,000)
Decrease in minority interest (2,914,000)
-----------
Issuance of cash payments $ (820,000)
===========
Note 4 - Shareholders' Equity
During the first nine months of 1997, holders of 11,334 shares of Series C
Preferred Stock exchanged their shares for 3,778 shares of common stock. The
exchanges were recorded as a reduction in preferred stock and an increase in
common stock of $31,282. Shares of stock valued at $3,966 and cash of $16 were
issued in the first nine months of 1997 for the Dividend Arrearage due to the
holders of Series C Preferred Stock who converted their shares in the first nine
months of 1997.
7
During the second quarter of 1997, holders of 307 shares of Series A Preferred
Stock exchanged their shares for lodging certificates at Kohl's Ranch. Preferred
stock was reduced by $3,070, which is the liquidation and par value of the
shares surrendered and additional paid in capital was increased by $1,150, which
is the difference between the par value of the preferred stock and the liability
recorded related to the lodging certificates.
During the first six months of 1997, the Company issued to employees in exchange
for services provided 14,200 shares of restricted common stock, valued at
$39,875.
In June 1997, the Company entered into an agreement with EVEREN Securities, Inc.
("ESI") for ESI to act as ILX's exclusive financial advisor, investment banker
and agent with respect to evaluation of alternatives to position ILX for
long-term growth and to enhance shareholder value. In exchange for the services,
ILX issued 12,000 shares of ILX common stock on August 1, 1997 and will issue an
additional 12,000 shares on February 1, 1998. The shares issued and to be issued
have been valued at $112,500. In accordance with the terms of the agreement, ILX
has registered with the Securities and Exchange Commission the shares issued in
August and will likewise cause the shares to be issued in February to be so
registered. The parties intend for the agreement to remain in effect for a
minimum of one year.
Note 5 - Subsequent Events
In October 1997, the Company made a bid to acquire an approximate 5/8 undivided
interest in the common areas of and all of the undeveloped and unsold portions
of the Roundhouse Resort, an existing 59-unit resort with five acres of
developable land located in Pinetop/Lakeside, Arizona. The Company's bid has
been approved by the United States Bankruptcy Court for the District of Arizona,
with the closing expected in mid-November. The bid price is $700,000, to consist
of $525,000 in cash and $175,000 in stock valued at the market price on the
closing date.
8
Part I
Item II. Management's Discussion and Analysis of Financial Condition and
Results of Operations
ILX RESORTS INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Reverse Stock Split
- -------------------
On January 9, 1998, the Company's shareholders approved an amendment to the
Company's Articles of Incorporation to effect a one-for-five reverse stock split
of the Company's issued and outstanding shares of common stock. The reverse
stock split became effective as of 5:00 p.m. Mountain Standard Time on January
12, 1998. The reverse stock split has been retroactively reflected in the
following "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Results of Operations
- ---------------------
Sales of Vacation Ownership Interests were 24.3% and 16.2% greater for the three
and nine months ended September 30, 1997, respectively, than for the same
periods in 1996. The increases reflect greater sales from the Sedona and South
Bend Sales Offices, sales to customers already owning Vacation Ownership
Interests in ILX resorts, and the opening of sales offices in Tucson and the
Phoenix metropolitan area, net of reduced sales from the Kohl's Ranch Sales
Office for the first six months of 1997.
The increase in sales to existing ILX owners in 1997 reflects an expanded
marketing program whereby owners are offered the opportunity to upgrade their
Interest to a larger size unit, to exchange their Interest to a different
resort, and/or to purchase additional Vacation Ownership Interests. As a result
of the increased marketing efforts to existing customers, revenue increased to
approximately $471,000 in 1997 from $202,000 in 1996 for the third quarter, and
to $2,175,000 from $703,000 for the nine months ended September 30, 1997 and
1996, respectively.
Sales of Vacation Ownership Interests from the Sedona Sales Office increased
approximately $190,000 and $454,000 for the three and nine months ended
September 30, 1997 from the same periods in 1996 due to increases in prices and
a greater number of timeshare tours, and in the first and third quarters of
1997, increased closing rates (number of Vacation Ownership Interest sales
divided by number of timeshare tours).
Sales of Vacation Ownership Interests in Varsity Clubs of America - South Bend
were $2,496,990 and $1,823,887 and $5,715,935 and $3,879,491 for the three and
nine months ended September 30, 1997 and 1996, respectively. In 1997,
approximately $3,904,000 in Varsity Clubs of America - South Bend sales were
generated from the South Bend Sales Office, $1,768,000 from the Sedona Sales
Office, which commenced offering Interests in Varsity Clubs of America - South
Bend in June 1996 and $44,000 from the Tucson Sales Office, which opened in
August 1997. Sales of Varsity Clubs of America - South Bend in the first six
months of 1996 were primarily from the South Bend Sales Office. The increase in
1997 sales from the South Bend Sales Office reflects higher closing rates and
increased prices.
Sales of Vacation Ownership Interests in Kohl's Ranch increased approximately
$112,000 in the third quarter of 1997 from the third quarter of 1996, reflecting
increased prices, net of a reduced
9
closing rate. Sales decreased approximately $306,000 for the nine months ended
September 30, 1997 from the same period in 1996 as a result of lower closing
rates and a lower number of timeshare tours, which in part were offset by
increased prices. Second and third quarter 1997 sales include $109,395 in sales
of Kohl's Ranch Interests from a sales office opened on a trial basis in the
Phoenix metropolitan area in late April 1997. The office was not retained beyond
the trial period (April - July 1997) due to high marketing costs and low closing
rates.
In late August 1997, the Tucson Sales Office opened and began selling Vacation
Ownership Interests in Los Abrigados Resort & Spa, Varsity Clubs of America -
South Bend and Kohl's Ranch Lodge. Sales from this office were $240,730 for the
third quarter of 1997.
Resort operating revenues and cost of resort operations are comparable between
the periods presented.
The decrease in sales of land and other and the related cost of sales for the
nine months ended September 30, 1997 reflects the sale of a parcel of land held
by Genesis in the second quarter of 1996. Sales are comparable for the three
months ended September 30, 1997 and 1996.
The increase in interest income from 1996 to 1997 is a result of the increased
consumer paper retained by the Company and an increase in interest rates charged
by the Company effective July 1997. The Company hypothecates (borrows against)
the majority of its retained paper.
Sales and marketing as a percentage of sales of Vacation Ownership Interests has
increased for both the third quarter and nine months ended September 30, 1997
from the same periods in 1996 due to increased costs of generating tours to the
Arizona sales offices in 1997, a low closing rate in the trial Phoenix office in
1997, a lower closing rate at the Kohl's Ranch Sales Office in 1997 than 1996,
the opening of the Tucson Sales Office in 1997, and due to the recognition in
1996 of benefits from premiums issued to potential customers in prior periods
which expired without redemption. Increases in costs of generating tours in 1997
is due in part to the trial of several new marketing strategies which were
determined not to be cost effective and therefore terminated in July and August
1997.
The increase in the provision for doubtful accounts for the third quarter of
1997 from same period in 1996 reflects an adjustment to the provision in 1996
based on the expected performance of the portfolio of consumer paper, both sold
and unsold. The provision for doubtful accounts is comparable as a percentage of
sales of Vacation Ownership Interests for the nine months ended September 30,
1997 and 1996.
Interest expense is comparable between periods and reflects increased borrowings
against consumer paper retained by the Company, borrowings against resort
property held for Vacation Ownership Interest sales and debt issued in exchange
for the purchase of LAP minority interest, net of payments.
General and administrative expenses increased for both the third quarter and
nine months ended September 30, 1997 from the same periods in 1996 due to an
increase in payroll expense, professional fees and rent expense.
The decrease in minority interests from 1996 to 1997 reflects the purchase by
the Company of the minority interest in LAP in August 1997 and reduced Los
Abrigados resort income.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity needs principally arise because it finances consumer
purchases of Vacation Ownership Interests. The Company addresses such liquidity
needs through the sale
10
and/or hypothecation of the consumer notes it generates. In that regard, the
Company has $5 million of credit issued by a financing company under which
conforming notes from sales of Vacation Ownership Interests in Los Abrigados
Resort & Spa can be sold on a recourse basis through March 1998. In addition,
the Company has an open ended arrangement with a finance company which is
expected to provide financing of notes from sales of Vacation Ownership
Interests in Los Abrigados Resort & Spa of at least $5 million through 1997. At
September 30, 1997, approximately $2.2 million is available under the fixed
commitment line and a minimum of $2.4 million is expected to be available on the
open-ended line. The Company also has financing commitments whereby the Company
may borrow up to $2 million against non-conforming notes from sales of Vacation
Ownership Interests in Los Abrigados Resort & Spa, Golden Eagle Resort, Kohl's
Ranch and Varsity Clubs of America - South Bend, and $2.2 million against
conforming notes from sales of Vacation Ownership Interests in Golden Eagle
Resort through March 1998. Approximately $900,000 was available under these
commitments at September 30, 1997.
The Company has a $10 million open-ended financing arrangement whereby the
Company may sell eligible notes received from sales of Vacation Ownership
Interests in Varsity Clubs of America - South Bend on a recourse basis.
Approximately $3.5 million was available under this commitment at September 30,
1997.
The Company has financing commitments whereby it may borrow up to $5 million
against conforming notes received from sales of Vacation Ownership Interests in
Kohl's Ranch through March 1998 and $5 million through June 2000. Approximately
$2.2 million was available on the first commitment and $5 million on the second
commitment at September 30, 1997.
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 through internal funds. 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 each from two financial institutions.
At September 30, 1997, $800,000 was available for working capital.
In June 1997, the Company negotiated a settlement agreement for the 1996 breach
by a timeshare lender of a 1995 management agreement between the lender and the
Company. Under the management agreement, the lender committed to advance $3.5
million, but failed to fund $1.1 million of this amount. The settlement
agreement provides for repayment of the outstanding advances through a note
payable in the amount of $2.4 million.
In July 1997, the Company borrowed $1.5 million, secured by a first position
deed of trust on Kohl's Ranch Lodge. The funds were used to repay the prior
first deed of trust of $444,500, and the balance for working capital.
In July 1997, the Company acquired 285 Vacation Ownership Interests in Los
Abrigados Resort & Spa for approximately $567,000. The purchase of the Vacation
Ownership Interests was financed by a $598,500 borrowing from one of the
Company's timeshare lenders, and is secured by the Vacation Ownership Interests
acquired.
In August 1997, the Company acquired the Class B Limited Partnership Interests
in Los Abrigados for $820,000 cash, 20,000 shares of the Company's common stock
valued at $6.25 per share and notes payable totaling $1,975,000 secured by the
Company's interest in LAP. The Company borrowed an additional $800,000 from the
first mortgage holder on Los Abrigados to finance the acquisition.
11
During the third quarter of 1997, the Company borrowed $1,309,268 on its
construction financing commitment for the Varsity Clubs of America - Tucson
facility.
Cash provided by operating activities increased from $2,529,571 in 1996 to
$2,966,575 in 1997 due to greater net income and an increase in accrued
liabilities, offset by additions to resort property under development in 1997
and greater additions to resort property held for Vacation Ownership Interest
sales in 1996.
The increase in cash used in investing activities from $3,299,538 in 1996 to
$5,810,572 in 1997 reflects an increase in consumer notes retained by the
Company, an increase in purchases of plant and equipment and the cash payment of
$820,000 in connection with the acquisition of the minority interest in LAP.
The change from cash used in financing activities in 1996 of $341,205 to cash
provided by financing activities in 1997 of $1,539,211 reflects greater
borrowings in 1997 and a reduction in distributions to minority partners.
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.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Amendment No. 1 to its
quarterly report on Form 10-Q to be signed on its behalf by the undersigned
thereunto duly authorized.
ILX RESORTS INCORPORATED
(Registrant)
/S/ Joseph P. Martori
-------------------------------
Joseph P. Martori
Chief Executive Officer
/S/ Nancy J. Stone
-------------------------------
Nancy J. Stone
President
/S/ Jay R. Hoffman
-------------------------------
Jay R. Hoffman
Chief Financial Officer
Date: As of February 11, 1998
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