SECURITIES
AND EXCHANGE COMMISSION





Washington,
D.C.  20549





FORM
10-Q





QUARTERLY
REPORT UNDER SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For
      The Quarter Ended March 31,
      2009
            Commission
      File Number 001-13855





ILX RESORTS
INCORPORATED


(Debtor
and Debtor-In-Possession as of March 2, 2009)


(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 200, Phoenix, Arizona 85016


(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.





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
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes x    No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer  o
              Accelerated
      filer  oNon-accelerated
      filer  o
              Smaller
      reporting company  x





Indicate
by check mark whether the registrant is a shell company.   
 Yes o No x





Indicate
the number of shares outstanding of each of the Registrant’s classes of stock,
as of the latest practicable date.





Class
                  
                  Outstanding at March 31,
    2009Common
      Stock, without par value
                  
                  3,635,877
      shares









ITEM
1.  FINANCIAL STATEMENTS





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-In-Possession as of March 2, 2009)


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)




December
31,
                                            
                                            
                                            March 31,2008
                                            
                                            
                                            2009ASSETSCash and cash
      equivalents
                                            
                                            $
                                            2,145,601
                                            
                                            
                                            $
                                            1,242,003Notes receivable, net of allowance
      for uncollectible notes of $2,766,951 and $3,055,262,
      respectively
                                            
                                            
                                            19,297,008
                                            
                                            
                                            
                                            18,623,046Resort property held for Vacation
      Ownership Interest sales
                                            
                                            
                                            23,997,073
                                            
                                            
                                            
                                            23,643,418Resort property under
      development
                                            
                                            
                                            1,269,445
                                            
                                            
                                            
                                            1,274,613Land held for
      sale
                                            
                                            
                                            586,681
                                            
                                            
                                            
                                            595,295Property and equipment,
      net
                                            
                                            
                                            21,007,739
                                            
                                            
                                            
                                            20,681,846Income tax
      receivable
                                            
                                            
                                            31,892
                                            
                                            
                                            
                                            31,892Deferred tax
      asset
                                            
                                            
                                            1,978,332
                                            
                                            
                                            
                                            2,667,717Other
assets
                                            
                                            
                                            2,492,211
                                            
                                            
                                            
                                            2,685,488TOTAL
ASSETS
                                            
                                            $
                                            72,805,982
                                            
                                            
                                            $
                                            71,445,318LIABILITIES AND SHAREHOLDERS'
      EQUITYLIABILITIES:Liabilities not subject to
      compromise:Accounts
      payable
                                            
                                            $
                                            1,847,903
                                            
                                            
                                            $
                                            526,392Accrued expenses and other
      liabilities
                                            
                                            
                                            3,864,210
                                            
                                            
                                            
                                            3,663,149Notes
    payable
                                            
                                            
                                            37,172,105
                                            
                                            
                                            
                                            34,507,806Liabilities subject to
      compromise
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3,868,154TOTAL
      LIABILITIES
                                            
                                            
                                            42,884,218
                                            
                                            
                                            
                                            42,565,501COMMITMENTS AND
      CONTINGENCIESSHAREHOLDERS'
      EQUITYILX Resorts Incorporated
      shareholders' equity:Preferred stock, $10 par value;
      10,000,000 shares authorized; 117,722 shares issued and
      outstanding; liquidation preference
      of  $1,177,220
                                            
                                            
                                            746,665
                                            
                                            
                                            
                                            746,665Common stock, no par value;
      30,000,000 shares authorized; 5,580,259 and 5,578,259 shares
      issued and outstanding
                                            
                                            
                                            29,322,887
                                            
                                            
                                            
                                            29,306,263Treasury stock, at cost, 1,942,382
      shares
                                            
                                            
                                            (10,005,915
                                            )
                                            
                                            
                                            (10,005,915
                                            )Additional paid-in
      capital
                                            
                                            
                                            59,435
                                            
                                            
                                            
                                            59,435Deferred
      compensation
                                            
                                            
                                            (91,503
                                            )
                                            
                                            
                                            (70,117
                                            )Retained
      earnings
                                            
                                            
                                            7,908,805
                                            
                                            
                                            
                                            6,874,728Total ILX Resorts Incorporated
      shareholders' equity
                                            
                                            
                                            27,940,374
                                            
                                            
                                            
                                            26,911,059Non controlling interest in
      subsidiary
                                            
                                            
                                            1,981,390
                                            
                                            
                                            
                                            1,968,758TOTAL SHAREHOLDERS'
      EQUITY
                                            
                                            
                                            29,921,764
                                            
                                            
                                            
                                            28,879,817TOTAL LIABILITIES AND
      SHAREHOLDERS' EQUITY
                                            
                                            $
                                            72,805,982
                                            
                                            
                                            $
                                            71,445,318





See notes
to condensed consolidated financial statements





2





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-In-Possession as of March 2, 2009)


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





Three months ended
      March 31,2008
                                          
                                          
                                          2009REVENUES:Sales of Vacation Ownership
      Interests
                                          
                                          $
                                          5,273,647
                                          
                                          
                                          $
                                          3,057,076Estimated uncollectible
      revenue
                                          
                                          
                                          (231,486
                                          )
                                          
                                          
                                          (172,160
                                          )Resort operating
      revenue
                                          
                                          
                                          4,735,885
                                          
                                          
                                          
                                          4,299,416Interest and finance
      income
                                          
                                          
                                          645,431
                                          
                                          
                                          
                                          509,349Total
    revenues
                                          
                                          
                                          10,423,477
                                          
                                          
                                          
                                          7,693,681COST OF SALES AND OPERATING
      EXPENSES:Cost of Vacation Ownership
      Interests sold
                                          
                                          
                                          677,115
                                          
                                          
                                          
                                          389,927Cost of resort
      operations
                                          
                                          
                                          4,323,041
                                          
                                          
                                          
                                          3,656,458Sales and
      marketing
                                          
                                          
                                          3,854,746
                                          
                                          
                                          
                                          2,622,642General and
      administrative
                                          
                                          
                                          1,679,915
                                          
                                          
                                          
                                          1,291,081Depreciation and
      amortization
                                          
                                          
                                          324,383
                                          
                                          
                                          
                                          278,310Total cost of sales and operating
      expenses
                                          
                                          
                                          10,859,200
                                          
                                          
                                          
                                          8,238,418Timeshare and resort operating
      loss
                                          
                                          
                                          (435,723
                                          )
                                          
                                          
                                          (544,737
                                          )Income from land and other, net
      (including Related Party)
                                          
                                          
                                          33,730
                                          
                                          
                                          
                                          13,327Total operating
      loss
                                          
                                          
                                          (401,993
                                          )
                                          
                                          
                                          (531,410
                                          )Interest
      expense
                                          
                                          
                                          (665,824
                                          )
                                          
                                          
                                          (663,251
                                          )REORGANIZATION
      ITEMS:Loss on disposal of
      facilities
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (391,433
                                          )Professional
      fees
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (150,000
                                          )Loss before income taxes and
      noncontrolling interest in subsidiary
                                          
                                          
                                          (1,067,817
                                          )
                                          
                                          
                                          (1,736,094
                                          )Income tax
      benefit
                                          
                                          
                                          421,897
                                          
                                          
                                          
                                          689,385Loss before noncontrolling
      interest in subsidiary
                                          
                                          
                                          (645,920
                                          )
                                          
                                          
                                          (1,046,709
                                          )Non controlling interest in
      subsididary
                                          
                                          
                                          13,073
                                          
                                          
                                          
                                          12,632NET LOSS
                                          
                                          $
                                          (632,847
                                          )
                                          
                                          $
                                          (1,034,077
                                          )NET LOSS PER
      SHARETotal Basic loss per
      share
                                          
                                          $
                                          (0.18
                                          )
                                          
                                          $
                                          (0.29
                                          )Total Diluted loss per
      share
                                          
                                          $
                                          (0.18
                                          )
                                          
                                          $
                                          (0.29
                                          )


See notes
to condensed consolidated financial statements





3





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-In-Possession as of March 2, 2009)


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Three months ended March
      31,2008
                                              
                                              
                                              2009CASH FLOWS FROM OPERATING
      ACTIVITIES:Net loss
                                              
                                              $
                                              (632,847
                                              )
                                              
                                              $
                                              (1,034,077
                                              )Adjustments to reconcile net loss
      to net cash used in operating
      activities:Loss on sale of property and
      equipment
                                              
                                              
                                              -
                                              
                                              
                                              
                                              9,840Reorganization loss on disposal of
      facilities
                                              
                                              
                                              -
                                              
                                              
                                              
                                              391,433Reorganization professional
      fees
                                              
                                              
                                              -
                                              
                                              
                                              
                                              150,000Undistributed noncontrolling
      interest in subsidiary
                                              
                                              
                                              (13,073
                                              )
                                              
                                              
                                              (12,632
                                              )Income tax
      benefit
                                              
                                              
                                              (421,897
                                              )
                                              
                                              
                                              (689,385
                                              )Estimated uncollectible
      revenue
                                              
                                              
                                              231,486
                                              
                                              
                                              
                                              172,160Depreciation and
      amortization
                                              
                                              
                                              324,383
                                              
                                              
                                              
                                              278,310Amortization of deferred
      compensation
                                              
                                              
                                              46,254
                                              
                                              
                                              
                                              4,762Change in assets and
      liabilities:Decrease (increase) in notes
      receivable, net
                                              
                                              
                                              216,353
                                              
                                              
                                              
                                              (138,289
                                              )(Increase) decrease in resort
      property held for Vacation OwnershipInterest
    sales
                                              
                                              
                                              (3,101,285
                                              )
                                              
                                              
                                              353,655Decrease (increase) in resort
      property under development
                                              
                                              
                                              3,080,664
                                              
                                              
                                              
                                              (5,168
                                              )Increase in land held for
      sale
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (8,614
                                              )Increase in other
      assets
                                              
                                              
                                              (494,943
                                              )
                                              
                                              
                                              (608,537
                                              )(Decrease) increase in accounts
      payable
                                              
                                              
                                              (371,057
                                              )
                                              
                                              
                                              625,982Increase in accrued and other
      liabilities
                                              
                                              
                                              581,065
                                              
                                              
                                              
                                              301,097Decrease in income taxes
      payable
                                              
                                              
                                              (32,416
                                              )
                                              
                                              
                                              -Net cash used in operating
      activities
                                              
                                              
                                              (587,313
                                              )
                                              
                                              
                                              (209,463
                                              )CASH FLOWS FROM INVESTING
      ACTIVITIES:Purchases of property and
      equipment
                                              
                                              
                                              (203,537
                                              )
                                              
                                              
                                              (82,716
                                              )Assumption of First Piggy LLC
      membership interests
                                              
                                              
                                              33,264
                                              
                                              
                                              
                                              -Net cash used in investing
      activities
                                              
                                              
                                              (170,273
                                              )
                                              
                                              
                                              (82,716
                                              )CASH FLOWS FROM FINANCING
      ACTIVITIES:Proceeds from notes
      payable
                                              
                                              
                                              3,763,078
                                              
                                              
                                              
                                              603,450Principal payments on notes
      payable
                                              
                                              
                                              (2,376,633
                                              )
                                              
                                              
                                              (1,748,341
                                              )Cash collateral
      received
                                              
                                              
                                              -
                                              
                                              
                                              
                                              533,472Principal payment on note payable
      to affiliate
                                              
                                              
                                              (300,000
                                              )
                                              
                                              
                                              -Net cash provided by (used in)
      financing activities
                                              
                                              
                                              1,086,445
                                              
                                              
                                              
                                              (611,419
                                              )INCREASE (DECREASE) IN CASH AND
      CASH EQUIVALENTS
                                              
                                              
                                              328,859
                                              
                                              
                                              
                                              (903,598
                                              )CASH AND CASH EQUIVALENTS AT
      BEGINNING OF PERIOD
                                              
                                              
                                              3,332,922
                                              
                                              
                                              
                                              2,145,601CASH AND CASH EQUIVALENTS AT END
      OF PERIOD
                                              
                                              $
                                              3,661,781
                                              
                                              
                                              $
                                              1,242,003SUPPLEMENTAL DISCLOSURE OF NONCASH
      INVESTING AND FINANCING
      ACTIVITIES:Deferred compensation resulting
      from unvested common stock issuance
                                              
                                              $
                                              17,376
                                              
                                              
                                              $
                                              -Common stock issued to repay
      portion of note payable to affiliate
                                              
                                              
                                              300,000
                                              
                                              
                                              
                                              -


See notes
to condensed consolidated financial statements





4





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-in-Possession as of March 2, 2009)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Note
1. Chapter 11 Reorganization





On March
2, 2009 (the “Petition Date”), ILX Resorts Incorporated (“ILX” or the “Company”)
and fifteen of its subsidiaries and limited liability companies (“the Debtors”)
filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code (“the Bankruptcy Code”) in the United States Bankruptcy
Court for the District of Arizona (“the Bankruptcy Court”).  The cases
are being jointly administered under Case Number
2:09-BK-03594-RTB.  The Company cannot provide any assurance as to
what values, if any, will be ascribed in the bankruptcy proceedings to various
pre-petition liabilities, common stock and other securities. Accordingly,
caution should be exercised with respect to existing and future investments in
any of these liabilities or securities. Trading of the Company’s common stock on
the NYSE AMEX exchange was suspended on March 2, 2009 and the stock was
subsequently delisted on March 13, 2009.





Reporting
Requirements





As a
result of its bankruptcy filing, the Company will be periodically required to
file various documents with and provide certain information to, the Bankruptcy
Court, including statements of financial affairs, schedules of assets and
liabilities and monthly operating reports in forms prescribed by federal
bankruptcy law, as well as certain financial information on an unconsolidated
basis. Such materials will be prepared according to requirements of federal
bankruptcy law.  While they accurately provide then-current
information required under federal bankruptcy law, they are nonetheless
unconsolidated, unaudited and are prepared in a format different from that used
in the Company’s consolidated financial statements filed under the securities
laws.  Accordingly, the Company believes that the substance and format
do not allow meaningful comparison with its regular publicly disclosed
consolidated financial statements.  Moreover, the materials filed with
the Bankruptcy Court are not prepared for the purpose of providing a basis for
an investment decision relating to the Company’s securities, or for comparison
with other financial information filed with the Securities and Exchange
Commission.





Reasons
for Bankruptcy





The
Debtor’s Chapter 11 filings were due to recent economic conditions and
unanticipated reductions in credit facilities caused by instability in the
credit markets.





First
Day Motions





The
Bankruptcy Court has approved various motions for relief designed to allow the
Company to continue normal operations.  The Bankruptcy Court’s orders
authorize the Debtors, among other things, in their discretion to: a) pay
certain pre-petition and post-petition employee wages, salaries and benefits and
other employee obligations, b) pay vendors in the ordinary course for goods and
services received from and after the Petition Date, c) continue maintenance of
existing bank accounts and existing cash management systems, and d) use certain
cash collateral through June 30, 2009.





Notifications





Shortly
after the Petition Date, the Debtors began notifying all known current or
potential creditors of the Chapter 11 filing.  The Debtors’ Chapter 11
filing automatically enjoined, or stayed, the continuation of any judicial or
administrative proceeding or other actions against the Debtors or their property
to recover on, collect or secure a claim arising prior to the Petition
Date.  Vendors are being paid for goods and services provided after
the Petition Date in the ordinary course of business.  Under the
Bankruptcy Code, the Company may assume or reject certain unexpired leases
subject to the Bankruptcy Court’s approval and certain other
conditions.  As of the filing date of this report, the Debtors have
filed motions to reject seven operating leases; five of which have been
granted.  Various other filings have been made with respect to
utilities, third party servicing firms, professional firm engagements and
contract approvals.





5





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-in-Possession as of March 2, 2009)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




Plan
of Reorganization





The
Debtors have the exclusive right for 120 days after the Petition Date to file a
plan of reorganization and an additional 60 days to obtain necessary acceptances
of the plan.  There can be no assurance at this time that the Company
will be able to restructure as a going concern or that a plan of reorganization
will be confirmed by the Bankruptcy Court, or that any such plan will be
implemented successfully.





Risks
and Uncertainties





The ability of the Company, both during
and after the Chapter 11 case, to continue as a going concern is dependent upon,
among other things, a) the ability of the Company to successfully achieve
required cost savings to complete its restructuring; b) the ability of the
Company to maintain adequate liquidity; c) the ability of the Company to
generate cash from operations; d) the ability of the Company to secure future
financing; e) the ability of the Company to confirm a plan of reorganization
under the Bankruptcy Code and f) the Company’s ability to achieve
profitability.  Uncertainty as to the outcome of these factors raises
substantial doubt about the Company’s ability to continue as a going
concern.  The accompanying condensed consolidated financial statements
only include adjustments related to the lease rejections and do not include
adjustments to reflect or provide for further consequences of the bankruptcy
proceedings.  A plan of reorganization could materially change the
amounts currently disclosed in the consolidated financial
statements.





Liquidity
and Going Concern Matters





The accompanying condensed consolidated
financial statements have been prepared assuming the Company will continue as a
going concern.  This assumes a continuation of operations and the
realization of assets and liabilities in the ordinary course of
business.  The condensed consolidated financial statements do not
include any adjustments that might result if the Company were forced to
discontinue operations.  The Company has liquidity needs in the
operation of its business which are eased by the use of cash collateral
discussed above.  In order to address liquidity concerns, the Company
has made expense reductions and scaled back its sales and marketing
operations.  It has also rejected certain lease agreements as
discussed above.




Note
2. Summary of Significant Accounting Policies





Principles
of Consolidation and Business Activities





The
condensed consolidated financial statements include the accounts of ILX Resorts
Incorporated, and its wholly owned subsidiaries (“ILX” or the
“Company”).  All significant intercompany transactions and balances
have been eliminated in consolidation.





The accompanying condensed consolidated
balance sheet as of December 31, 2008, which has been derived from audited
financial statements, and the unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America 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 accounting principles generally accepted in the United States
of America 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-month period ended
March 31, 2009 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2009.  The accompanying
financial statements should be read in conjunction with the Company’s most
recent audited financial statements.





The
Company’s significant business activities include developing, operating,
marketing and financing ownership interests (“Vacation Ownership Interests”) in
resort properties located in Arizona, Colorado, Indiana, Nevada and
Mexico.





6





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-in-Possession as of March 2, 2009)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




Revenue
Recognition





Revenue
from sales of Vacation Ownership Interests is recognized in accordance with
Statement of Financial Accounting Standards No. 152, Accounting for Real Estate
Time-Sharing Transactions (“SFAS 152”).  No sales are recognized until
such time as a minimum of 10% of the purchase price and any incentives given at
the time of sale has been received in cash, the statutory rescission period has
expired, 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 (inclusive of homeowner’s dues) and revenues from food and
other resort services.  Such revenues are recorded as the rooms are
rented or the services are performed.





Condensed
Consolidated Statements of Cash Flows





Cash
equivalents are liquid investments with an original maturity of three months or
less.  The following summarizes interest paid (excluding capitalized
interest), income taxes paid and interest capitalized.




Three Months Ended March
      31,2008
                    
                    
                    2009Interest
    paid
                    
                    $
                    669,901
                    
                    
                    $
                    313,572Income taxes
      paid
                    
                    
                    32,416
                    
                    
                    
                    -Interest
      capitalized
                    
                    
                    270,785
                    
                    
                    
                    81,496





Stock
Based Compensation





The
Company records stock based compensation in accordance with the provisions of
SFAS No. 123R. SFAS No. 123R addresses the accounting for share-based payments
to employees, including grants of employee stock options.Under the standard, the
Company is required to account for such transactions using a fair-value method
and recognize the expense in the condensed consolidated statement of
operations.





Note
3. Reorganization Items





SOP 90-7
requires separate disclosure of reorganization items on both the statement of
operations and the statement of cash flows.  The Debtors’
reorganization items on the condensed consolidated statements of operations
consist of the following:




Three Months Ended March
      31,2008
                        
                        
                        2009Loss on disposal of
      facilities
                        
                        $
                        -
                        
                        
                        $
                        391,433Professional
      fees
                        
                        
                        -
                        
                        
                        
                        150,000$
                        -
                        
                        
                        $
                        541,433





The loss
on disposal of facilities includes the write-off of lease acquisition costs,
deposits, leasehold improvements and other items related to the rejection of
seven unexpired leases as discussed in Note 1.  Professional fees
related to the reorganization are fees paid to legal counsel and are estimated
by the Debtors and will be reconciled when actual invoices are
received.





7





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-in-Possession as of March 2, 2009)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




The
Debtors’ reorganization items on the condensed consolidated statements of cash
flows consist of the following:


Three Months Ended March
      31,2008
                      
                      
                      2009Loss on disposal of
      facilities
                      
                      $
                      -
                      
                      
                      $
                      391,433Professional
      fees
                      
                      
                      -
                      
                      
                      
                      150,000Change in accounts
      payable
                      
                      
                      -
                      
                      
                      
                      1,953,207Change in accrued & other
      liabilities
                      
                      
                      -
                      
                      
                      
                      502,158Notes
    payable
                      
                      
                      -
                      
                      
                      
                      1,412,789Cash collateral
      received
                      
                      
                      -
                      
                      
                      
                      533,472





As
discussed in the First Day Motions section of Note 1, the Company was granted
use of cash collateral through June 30, 2009.  This motion allows the
Debtors the use of cash collateral received under its lines of credit
collateralized by customer notes and those amounts are indicated in the cash
collateral received line item.





Note
4. Liabilities Subject to Compromise





Liabilities
subject to compromise (“LSTC”) refer to both secured and unsecured obligations
that will likely be accounted for under a plan of
reorganization.  Actions to enforce or effect payment of pre-petition
liabilities are stayed.  SOP 90-7 requires pre-petition liabilities
that are subject to compromise to be reported at amounts expected to be allowed,
even if they may be settled for lesser amounts.  These liabilities
represent the estimated amount expected to be allowed on known or potential
claims to be resolved through the Chapter 11 proceedings and remain subject to
future adjustments arising from negotiated settlements, actions of the
Bankruptcy Court, rejection of executory contracts and unexpired leases, the
determination as to the value of collateral, proofs of claim, or other
events.  LSTC also includes certain items that may be assumed under
the plan of reorganization and as such may be subsequently reclassified to
liabilities not subject to compromise.  The Company has not included
secured debt that is fully secured as LSTC, but these obligations could be
transferred to LSTC based on treatment in the final plan of
reorganization.  The determination of how liabilities will be treated
cannot be made until the Bankruptcy Court approves a plan of
reorganization.  Liabilities subject to compromise consist of the
following:




Three Months Ended March
      31,2008
                        
                        
                        2009Accounts
      payable
                        
                        $
                        -
                        
                        
                        $
                        1,953,207Accrued & other
      liabilities
                        
                        
                        -
                        
                        
                        
                        502,158Notes
    payable
                        
                        
                        -
                        
                        
                        
                        1,412,789$
                        -
                        
                        
                        $
                        3,868,154





8





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-in-Possession as of March 2, 2009)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




Note 5. Basic and Diluted Net Loss
Per Share





In accordance with SFAS No. 128,
“Earnings Per Share,” the following presents the computation of basic and
diluted net loss per share:


Three Months
      EndedMarch 31,2008
                                              
                                              
                                              2009Net loss
                                              
                                              $
                                              (632,847
                                              )
                                              
                                              $
                                              (1,034,077
                                              )Less: Series A preferred stock
      dividends
                                              
                                              
                                              (11,697
                                              )
                                              
                                              
                                              (11,697
                                              )Basic and Diluted Net Loss
      Available to Common Shareholders
                                              
                                              $
                                              (644,544
                                              )
                                              
                                              $
                                              (1,045,774
                                              )Basic Weighted-Average Common
      Shares Outstanding
                                              
                                              
                                              3,618,807
                                              
                                              
                                              
                                              3,636,900Diluted Weighted-Average Common
      Shares Outstanding
                                              
                                              
                                              3,618,807
                                              
                                              
                                              
                                              3,636,900Basic Net Loss Per Common
      Share
                                              
                                              $
                                              (0.18
                                              )
                                              
                                              $
                                              (0.29
                                              )Diluted Net Loss Per Common
      Share
                                              
                                              $
                                              (0.18
                                              )
                                              
                                              $
                                              (0.29
                                              )





Stock
options to purchase 25,000 shares of common stock at a price of $9.90 per share
were outstanding at March 31, 2009 and 2008, but were not included in the
computation of diluted net income per share because their effect would be
anti-dilutive.  These options expire in December 2009.





Note
6. Shareholders’ Equity





During
the three months ended March 31, 2009, the Company reversed deferred
compensation of $16,624, representing 2,000 shares issued in January 2006 due to
the termination of a Stock Bonus Plan participant prior to vesting in the
shares.





Note
7.  Share Based Compensation





Employee
Stock Options





The
Company has Stock Option Plans pursuant to which options (which term as used
herein includes both incentive stock options and non-statutory stock options)
could have been granted through 2005 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 to
the success of the Company.  The exercise price of the options granted
pursuant to the Plans could 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.  Incentive stock 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.  No
further grants may be made under the Plans.





Stock
Bonus Plan





The
Company’s Stock Bonus Plan was created to advance the interests of the Company
and its shareholders, by encouraging and enabling selected officers, directors,
consultants and key employees upon whose judgment, initiative and effort the
Company is largely dependent for the successful conduct of its business to
acquire and retain a proprietary interest in the Company by ownership of its
stock.





9





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-in-Possession as of March 2, 2009)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





A summary of the non-vested stock under
the Stock Bonus Plan at March 31, 2009 follows:




Non-Vested
                                  Shares
                                
                                Weighted Average Grant
      Date
                                  Fair
      ValueNon-vested at December 31,
      2008
                                70,000
                                
                                $7.61Stock
    Granted
                                -
                                
                                -Stock
Vested
                                (31,500)
                                
                                8.23Stock
    Forfeited
                                (2,000)
                                
                                8.31Non-vested at March 31,
      2009
                                36,500
                                
                                $7.03





Unamortized
deferred compensation of $70,117 will be amortized over the weighted average
remaining term of .91 years.  As discussed in Note 1, the Company is
currently in Chapter 11 and its common stock was delisted in March
2009.  Therefore, the Company cannot currently ascribe a value to the
non-vested stock under the Stock Bonus Plan.





Note
8. Related Party Transactions





In prior
years the Company’s wholly owned subsidiary, Genesis Investment Group, Inc.
(“Genesis”), sold Vacation Ownership Interests to Premiere Vacation Club
homeowners’ association, an Arizona nonprofit corporation
(“PVC”).  PVC purchased the intervals at $2,415 per interval, the same
price at which it has historically acquired intervals in arms-length
negotiations with unaffiliated third parties.  PVC is owned by the
holders of its vacation ownership interests, including the
Company.  At March 31, 2009, deeds of trust for 636 of the Vacation
Ownership Interests secure outstanding indebtedness from PVC to Genesis of
$1,434,403 which is included in notes receivable.  Genesis is one of
the subsidiaries that filed a voluntary petition under Chapter 11 of the
Bankruptcy Code.





The
Company, together with James Bruno Enterprises LLC (Bruno), formed ILX-Bruno LLC
(“ILX-Bruno”) in August 2005 to purchase and develop three parcels approximating
22 acres of land in Sedona, Arizona from the Forest Service of the Department of
Agriculture and an unrelated party (approximately one acre).  The
Company entered into an Operating Agreement with Bruno, as a member of
ILX-Bruno, in which the Company was named as the manager of
ILX-Bruno.  The Company held an 85.0% interest in ILX-Bruno as of
March 31, 2009.  ILX-Bruno is included in the Company’s condensed
consolidated financial statements as of March 31, 2009 with Bruno’s capital
contributions net of operating losses included as noncontrolling interest in
subsidiary on the accompanying condensed consolidated balance
sheet.  ILX-Bruno is one of the entities that filed a voluntary
petition under Chapter 11 of the Bankruptcy Code.





In April
2008, Sedona Vacation Club Incorporated homeowners’ association (“SVC”) and PVC
entered into loan agreements to borrow up to $350,000 and $900,000,
respectively, at an interest rate of 6.15% to finance renovations and the
purchase of certain equipment.  The borrowings have a maturity date of
March 31, 2011.  ILX Resorts Incorporated has guaranteed the
borrowings, including interest, for both SVC and PVC and has entered into a
Guarantee Fee Agreement with SVC and PVC under which it received a guarantee fee
of 1% of the maximum principal amount under the loan agreements.  The
amounts outstanding under the loan agreements as of March 31, 2009 are
$833,333.





10





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


(Debtor
and Debtor-in-Possession as of March 2, 2009)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




Note
9. Commitments and Contingencies





Legal
Proceedings





As discussed in Note 1, the Company and
certain of its subsidiaries and limited liability companies are debtors in
possession in the Chapter 11 case.





Other
litigation has arisen in the normal course of the Company’s business, none of
which is deemed to be material.





11





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS




Item
2. 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 Form 10-Q, the words
“estimate,” “projection,” “intend,” “anticipates,” “expects,” “may,” “should”
and similar terms are intended to identify forward-looking statements that
relate to the Company’s future performance.  Actual results could
differ materially from these forward-looking statements as a result of a number
of factors, including, but not limited to, the Company’s need for additional
financing, intense competition in various aspects of its business, the risks of
rapid growth, its dependence on key personnel, general economic conditions,
government and regulatory actions, the impact of our announcement of our
voluntary filing under Chapter 11 of the United States Bankruptcy Code, the
ability to continue as a going concern, the ability to obtain court approval of
our motions in the Chapter 11 proceedings, our ability to develop, pursue,
confirm and consummate one or more plans of reorganization with respect to the
Chapter 11 cases, our ability to obtain and maintain normal terms with vendors
and service providers and other factors discussed in this document and in the
Company’s public filings with the Securities and Exchange Commission.Readers are cautioned not to place
undue reliance on the forward-looking statements set forth below.  The
Company undertakes no obligation to publicly update or revise any of the
forward-looking statements contained herein.





Overview





ILX
Resorts Incorporated (“ILX” or the “Company”) is one of the leading developers,
marketers and operators of timeshare resorts in the western United States and
Mexico.  The Company’s principal operations consist of (i) acquiring,
developing and operating timeshare resorts marketed by the Company as vacation
ownership resorts, (ii) marketing and selling vacation ownership interests in
the timeshare resorts, which typically have entitled the buyers thereof to
ownership of a fully-furnished unit for a one-week period on either an annual or
an alternate year (i.e., bienniel) basis (“Vacation Ownership Interests”), and
(iii) providing purchase money financing to the buyers of Vacation Ownership
Interests at its resorts.  In addition, the Company receives revenues
from the rental of unused or unsold inventory of units at its vacation ownership
resorts, and from the sale of food, beverages and other services at such
resorts.  The Company’s current portfolio of resorts consists of seven
resorts in Arizona, one in Indiana, one in Colorado, one in San Carlos, Mexico,
land in Puerto Penãsco (Rocky Point), Mexico and land in Sedona, Arizona
(collectively, the “ILX Resorts”).  The Company also owns 2,241
Vacation Ownership Interests in a resort in Las Vegas, Nevada, 2,233 of which
have been annexed into Premiere Vacation Club, 194 Vacation Ownership Interests
in a resort in Pinetop, Arizona, all of which have been annexed into Premiere
Vacation Club and 174 Vacation Ownership Interests in a resort in Phoenix,
Arizona, all of which have been annexed into Premiere Vacation
Club.  On March 2, 2009, the Company and certain of its subsidiaries
and limited liability companies filed for relief under Chapter 11 of the United
States Bankruptcy Court for the District of Arizona as discussed under Note 1.
in this Report on Form 10-Q.





Significant
Accounting Policies





Principles
of Consolidation and Business Activities





The
condensed consolidated financial statements include the accounts of ILX Resorts
Incorporated, and its wholly owned subsidiaries (“ILX” or the
“Company”).  All significant intercompany transactions and balances
have been eliminated in consolidation.





The
accompanying condensed consolidated balance sheet as of December 31, 2008, which
has been derived from audited financial statements, and the unaudited condensed
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Registration S-X.  Accordingly, they do not include all of the
information and notes required by accounting principles generally accepted in
the United States of America 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-month period
ended March 31, 2009 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2009.  The accompanying
financial statements should be read in conjunction with the Company’s most
recent audited financial statements.





12





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)




The
Company’s significant business activities include developing, operating,
marketing and financing ownership interests (“Vacation Ownership Interests”) in
resort properties located in Arizona, Colorado, Indiana Nevada and
Mexico.





Revenue
Recognition





Revenue
from sales of Vacation Ownership Interests is recognized in accordance with
Statement of Financial Accounting Standards No. 152, Accounting for Real Estate
Time-Sharing Transactions (“SFAS 152”).  No sales are recognized until
such time as a minimum of 10% of the purchase price and any incentives given at
the time of sale has been received in cash, the statutory rescission period has
expired, 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 (inclusive of homeowner’s dues) and revenues from food and
other resort services.  Such revenues are recorded as the rooms are
rented or the services are performed.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS
157).  SFAS 157 establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements.  SFAS 157 was effective for the Company as of
January 1, 2008.  In February 2008, the FASB issued FASB Staff
Position No. 157-2; which extended the effective date to fiscal years beginning
after November 15, 2008.  Adoption of this standard did not cause a
material change in financial position or results of operations.





In December 2007, the FASB issued
Statement of Financial Accounting Standards No. 141(R)BusinessCombinations(SFAS 141(R)) and Statement of
Financial Accounting Standards No. 160,Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No. 51(SFAS
160).  SFAS 141(R) requires an acquirer to measure the identifiable
assets acquired, the liabilities assumed and any non-controlling interest in the
acquiree at their fair values on the acquisition date, with goodwill being the
excess value over the net identifiable assets acquired.  SFAS 160
seeks to improve the relevance, comparability, and transparency of the financial
information that a reporting entity provides in its consolidated financial
statements by establishing accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS 141(R) and SFAS 160 are effective for fiscal years
beginning on or after December 15, 2008.  Earlier adoption is
prohibited.  The adoption of these standards did not have a material
effect on the Company’s financial position or results of
operations.





In December 2007, the FASB ratified
Emerging Issues Task Force (EITF) Issue No. 07-1,Accounting for
Collaborative Arrangements(EITF 07-1). EITF 07-1 defines
collaborative arrangements and establishes reporting requirements for
transactions between participants in a collaborative arrangement and between
participants in the arrangement and third parties. EITF 07-1 also establishes
the appropriate income statement presentation and classification for joint
operating activities and payments between participants, as well as the
sufficiency of the disclosures related to these arrangements. EITF 07-1 is
effective for fiscal years beginning after December 15, 2008.The
adoption of this EITF did not have a material effect on the Company’s financial
position or results of operations.





In
February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions (FSP FAS 140-3).
FSP FAS 140-3 requires an initial transfer of a financial asset and a repurchase
financing that was entered into contemporaneously or in contemplation of the
initial transfer to be evaluated as a linked transaction under SFAS No. 140
unless certain criteria are met, including that the transferred asset must be
readily obtainable in the marketplace. FSP FAS 140-3 is effective for fiscal
years beginning after November 15, 2008, and will be applied to new transactions
entered into after the date of adoption. Early adoption is prohibited. The
adoption of this FSP did not have a material effect on the Company’s financial
position or results of operations.





13





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)




In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161 Disclosures about Derivative
Instruments and Hedging Activities(SFAS 161).  SFAS 161
requires enhanced disclosures about an entity’s derivative and hedging
activities.  SFAS 161 is effective for fiscal years beginning on or
after November 15, 2008.  Earlier adoption is
encouraged.  The adoption of this standard did not have a material
effect on the Company’s financial position or results of
operations.





In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF 03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested
share-based payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders. Awards of this
nature are considered participating securities and the two-class method of
computing basic and diluted earnings per share must be applied. FSP EITF 03-6-1
is effective for fiscal years beginning after December 15, 2008. The adoption of
this EITF did not have a material effect on the Company’s financial position or
results of operations.





In
December 2008, the FASB issued FASB Staff Position FAS 140-4 and FIN 46(R)-8,
Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities ("FSP FAS 140-4 and FIN 46(R)-8"). FSP FAS 140-4 and
FIN 46(R)-8 amends SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities and FIN
46(R), FASB Interpretation No.
46 (R), Consolidation of Variable Interest Entities, an interpretation of
Accounting Research Bulletin No. 51, to require public entities to
provide additional disclosures about transfers of financial assets and their
involvement with variable interest entities. FSP FAS 140-4 and FIN 46(R)-8 is
effective for the first interim or annual reporting period ending after December
15, 2008. The adoption of these standards did not have a material effect on the
Company’s financial position or results of operations.





14





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)





Results
of Operations





The following table sets forth certain
operating information for the Company:


Three Months
      EndedMarch 31,2008
                                  
                                  
                                  2009As a percentage of total
      revenues:Sales of Vacation Ownership
      Interests
                                  
                                  
                                  50.6
                                  %
                                  
                                  
                                  39.7
                                  %Estimated uncollectible
      revenue
                                  
                                  
                                  (2.2
                                  %)
                                  
                                  
                                  (2.2
                                  %)Resort operating
      revenue
                                  
                                  
                                  45.4
                                  %
                                  
                                  
                                  55.9
                                  %Interest and finance
      income
                                  
                                  
                                  6.2
                                  %
                                  
                                  
                                  6.6
                                  %Total
    revenues
                                  
                                  
                                  100.0
                                  %
                                  
                                  
                                  100.0
                                  %As a percentage of sales of
      Vacation Ownership Interests(1):Cost of Vacation Ownership
      Interests sold
                                  
                                  
                                  13.4
                                  %
                                  
                                  
                                  13.5
                                  %Sales and
      marketing
                                  
                                  
                                  76.5
                                  %
                                  
                                  
                                  90.9
                                  %Contribution margin percentage
      from sale of Vacation Ownership Interests(2)
                                  
                                  
                                  10.1
                                  %
                                  
                                  
                                  (4.4
                                  %)As a percentage of resort
      operating revenue:Cost of resort
      operations
                                  
                                  
                                  91.3
                                  %
                                  
                                  
                                  85.0
                                  %As a percentage of total
      revenues(1):General and
      administrative
                                  
                                  
                                  16.1
                                  %
                                  
                                  
                                  16.8
                                  %Depreciation and
      amortization
                                  
                                  
                                  3.1
                                  %
                                  
                                  
                                  3.6
                                  %Total operating
      loss
                                  
                                  
                                  (3.9
                                  %)
                                  
                                  
                                  (6.9
                                  %)Selected operating
      data:Vacation Ownership Interests sold(3)
      (4)
                                  
                                  
                                  216
                                  
                                  
                                  
                                  160Average sales price per Vacation
      Ownership Interest sold (excluding revenues from
      Upgrades)(4)
                                  
                                  $
                                  18,014
                                  
                                  
                                  $
                                  14,743Average sales price per Vacation
      Ownership Interest sold (including revenues from
      Upgrades)(4)
                                  
                                  $
                                  23,881
                                  
                                  
                                  $
                                  18,457








(1)Sales
of Vacation Ownership Interests and total revenues includes the reduction for
estimated uncollectible revenue.


(2)
Defined as: the sum of Vacation Ownership Interest sales less the cost of
Vacation Ownership Interests sold less sales and marketing expenses less
estimated uncollectible revenue divided by sales of Vacation Ownership Interests
less estimated uncollectible revenue.


(3)Reflects all Vacation Club Ownership Interests on an annual
basis.


(4)Consists of an aggregate of 348 and 230 biennial and annual Vacation
Ownership Interests for the three months ended March 31, 2008 and 2009,
respectively.  Excludes the number of conversions and
upgrades.





15







MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)





Comparison
of the Three Months Ended March 31, 2008 to the Three Months Ended March 31,
2009





Sales of
Vacation Ownership Interests decreased 42.8% or $2,157,245 to $2,884,916 for the
three months ended March 31, 2009, from $5,042,161 for the same period in
2008.  The decrease reflects reduced sales at all sales
offices.  As part of a comprehensive expense reduction program, the
Company closed three of its sales offices in January 2009.  The
decreased revenue is the result of these closures as well as decreased closing
rates in the Sedona and Tucson sales offices due to seasonal variations, general
economic conditions and the impact of the Chapter 11 filing by the
Company.





The
average sales price per Vacation Ownership Interest sold (excluding revenues
from Upgrades) decreased 18.2% or $3,271 to $14,743 for the three months ended
March 31, 2009 from $18,014 for the same period in 2008.  The decrease
in average sales price is due to a change in the product mix sold and special
promotional pricing following the Company’s Chapter 11 filing.  The
number of Vacation Ownership Interests sold decreased 25.9% from 216 in the
three months ended March 31, 2008 to 160 for the same period in 2009 primarily
due to the closure of the three sales offices and decreased closing rates at the
Sedona and Tucson sales offices discussed above.  The three months
ended March 31, 2009 included 141 biennial Vacation Ownership Interests (counted
as 70.5 annual Vacation Ownership Interests) compared to 265 biennial Vacation
Ownership Interests (counted as 132.5 annual Vacation Ownership Interests) in
the same period in 2008.





Upgrade
revenue, included in Vacation Ownership Interest sales, decreased 53.2% to
$592,270 for the three months ended March 31, 2009 from $1,264,419 for the same
period in 2008.  The decrease in 2009 reflects decreased marketing
efforts to existing owners in Sedona and Tucson.  Upgrades often do
not involve the sale of additional Vacation Ownership Interests (merely their
exchange) and, therefore, such Upgrades increase the average sales price per
Vacation Ownership Interest sold.  The average sales price per
Vacation Ownership Interest sold (including upgrades) decreased 22.7% or $5,424
to $18,457 for the three months ended March 31, 2009 from $23,881 in
2008.  This decrease is due to the combination of the decrease in
average sales price per Vacation Ownership Interest sold (excluding Upgrades)
described above and the reduction in Upgrade revenue.





Resort
operating revenue decreased 9.2% to $4,299,416 for the three months ended March
31, 2009, from $4,735,885 for the same period in 2008.  The decrease
for the three months ended March 31, 2009 reflects decreased occupancy at the
Company’s resorts and decreased average daily rate at certain of the Company’s
Sedona and Tucson resorts.  Cost of resort operations as a percentage
of resort operating revenue decreased from 91.3% to 85.0% for the first quarter
ended March 31, 2009 reflecting expense reduction measures put in place in the
first quarter 2009 as well as the closure of the Los Abrigados Lodge in March
2009.  The Los Abrigados Lodge operated under a long term lease
agreement that was rejected as part of the Chapter 11 proceedings and was mainly
used to house tour guests and had minimal revenue from other
sources.





Interest
and finance income decreased 21.0% to $509,349 for the three months ended March
31, 2009 from $645,431 for the same period in 2008, reflecting decreased
Customer Note balances, a reduction in notes sold due to the expiration of the
agreement in June 2008 with a financial institution to sell Customer Notes and a
greater portion of Customer Notes being zero-interest one year
maturities.





Cost of
Vacation Ownership Interests sold as a percentage of Vacation Ownership Interest
sales was consistent at 13.5% and 13.4% for the three months ended March 31,
2009 and 2008, respectively.





Sales and
marketing as a percentage of sales of Vacation Ownership Interests increased to
90.9% for the three months ended March 31, 2009 from 76.5% for the same period
in 2008, reflecting decreased closing rates at the Sedona and Tucson sales
offices offset by lower marketing costs per tour and reduced sales office
expenses.





General
and administrative expenses increased to 16.8% of total revenue for the first
quarter ended March 31, 2009, from 16.1% for the same period in
2008.  The percentage increases reflect the reduction in total
revenue. The decrease in actual expenses of $388,834 for the three months ended
March 31, 2009 reflect reductions in legal expenses related to the Greens of Las
Vegas lawsuit settled in 2008 as well as a decrease in salaries and related
benefits as a result of a reduction in force and comprehensive salary reductions
in January 2009.





16





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)








Income
from land and other, net decreased to $13,327 for the three months ended March
31, 2009 from $33,730 for the three months ended March 31,
2008.  Income from land and other, net for the three months ended 2008
included a gain of $30,295 on the sale of vacation ownership interests to PVC by
Genesis.





Interest
expense was comparable at $663,251 and $665,824 for the three months ended March
31, 2009 and 2008, respectively reflecting reductions in rate on variable rate
borrowings and lower outstanding balances, net of reduced capitalized
interest.


Reorganization
items include loss on disposal of facilities and professional fees. The loss on
disposal of facilities includes the write-off of lease acquisition costs,
deposits, leasehold improvements and other items related to the rejection of
seven unexpired leases. Professional fees are fees paid to legal
counsel.





Liquidity
and Capital Resources





Sources
of Cash





The
Company generates cash primarily from the sale of Vacation Ownership Interests
(including Upgrades), from the financing of Customer Notes from such sales and
from resort operations.  Because the Company uses significant amounts
of cash in the development and marketing of Vacation Ownership Interests, but
collects the cash on the Customer Notes receivable over a long period of time,
borrowing against and/or selling receivables is necessary to provide sufficient
cash to fund its normal operations.  The Company is currently unable
to borrow under its facility, but does have the use of cash collateral generated
by customer payments under a motion granted by the Bankruptcy
Court.





For the
three months ended March 31, 2009 and 2008, cash used in operations was $209,463
and $587,313, respectively.  The decrease in cash used in operations
reflects the reorganization loss on disposal of facilities and professional
fees, a net decrease in resort property under development and resort property
held for Vacation Ownership Interest sales due to greater additions in 2008 for
the expansion of Premiere Vacation Club at Bell Rock and the Winner’s Circle
suites at Los Abrigados, and an increase in accounts payable due to pre-petition
amounts not payable under Chapter 11.  These decreases are offset by a
larger net loss and resultant net income tax benefit and a net increase in notes
receivable.





For
regular federal income tax purposes, the Company reports substantially all of
its non-factored financed Vacation Ownership Interest sales under the
installment method.  Under the installment method, the Company
recognizes income on sales of Vacation Ownership Interests only when cash is
received by the Company in the form of a down payment, as an installment
payment, or from proceeds from the sale of the Customer Note.  The
deferral of income tax liability conserves cash resources on a current
basis.  Interest may be imposed, however, on the amount of tax
attributable to the installment payments for the period beginning on the date of
sale and ending on the date the related tax is paid.  If the Company
is otherwise not subject to tax in a particular year, no interest is imposed
since the interest is based on the amount of tax paid in that
year.  The condensed consolidated financial statements do not contain
an accrual for any interest expense that would be paid on the deferred taxes
related to the installment method, as the interest expense is not
estimable.





Uses
of Cash





Investing
activities typically reflect a net use of cash because of capital
additions.  Net cash used in investing activities was $82,716 and
$170,273 for the three months ended March 31, 2009 and 2008,
respectively.  The decrease in net cash used in investing activities
in 2009 is due to reduced ILX-Bruno capital expenditures for projects in
Sedona.





Net cash
used in financing activities in the three months ended March 31, 2009 was
$611,419 as compared to net cash provided by financing activities of $1,086,445
in the three months ended March 31, 2008.  The decrease in cash
provided by financing activities is due to greater borrowings on notes payable
to finance construction projects and customer notes receivable in 2008 and the
repayment in 2008 of a note payable to affiliates, offset by cash collateral
received in 2009 as a result of the cash collateral order discussed in Notes 1
and 3.





17





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)





The
Company requires funds to finance the acquisitions of property for future resort
development and to further develop the existing resorts, as well as to make
capital improvements and support current operations.





Customer
defaults have a significant impact on cash available to the Company from
financing Customer Notes receivable.





Credit
Facilities and Capital





The
Company has a financing commitment aggregating $20 million whereby the Company
borrowed against notes receivable pledged as collateral.  These
borrowings bear interest at a rate of prime plus 1.5%.  The $20
million commitment has a borrowing period which expires in 2009 and the maturity
is in 2013.  At March 31, 2009, approximately $8.3 million was
available under this commitment.However, the Company may
not currently borrow on this facility due to its March 2, 2009 filing under
Chapter 11 of the United State Bankruptcy Code.





At March
31, 2008 and 2009, the Company had approximately $9.2 million and $6.1 million,
respectively, in outstanding notes receivable sold on a recourse
basis.  A small portion of the notes receivable are secured by
customer deeds of trust on Los Abrigados Resort & Spa and
VCA–Tucson.





In
January 2009, the Company amended an existing line of credit to reduce the
borrowing limit to $750,000 and change the interest rate to libor plus 3.84%,
but not less than 4.25%, from prime plus 1.0%.





On March
1, 2009 a Loan and Security Agreement in the original amount of $5.0 with
Textron Financial Corporation (the “Lender”) was terminated.  The
loan’s original maturity date was December 31, 2008 but was extended to February
28, 2009 by two separate letter agreements.  The outstanding principal
balance on the loan was $4,577,874 as of March 1, 2009.  The Company
and the Lender were unable to reach a mutually acceptable longer term extension
of the loan.  The loan is secured by an assignment of a Promissory
Note to the Company and a Deed of Trust from an affiliated limited liability
company securing approximately 14 acres of land in Sedona, Arizona.





The
Company is not in compliance with certain of its loan covenants which include
Debt Service Coverage Ratios and a Tangible Net Worth ratio.  In
addition, the March 2009 Chapter 11 filing constitutes an event of default under
the Company’s loan agreements.





As part
of its reorganization, the Company may negotiate additional credit facilities,
issue corporate debt, issue equity securities, or any combination of the
above.  Any debt incurred or issued by the Company may be secured or
unsecured, may bear interest at fixed or variable rates of interest, and may be
subject to such terms as management deems prudent and Bankruptcy Court
approval.  There is no assurance that the Company will be able to
secure additional corporate debt or equity at or beyond current levels or that
the Company will be able to maintain its current level of debt.





The
Company continues to assess its liquidity position due to current economic
conditions, sales challenges and expenses associated with the Chapter 11
Bankruptcy proceeding and the uncertainty of credit markets.





18





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)





Off-Balance
Sheet Arrangements





In April
2008, the Sedona Vacation Club Incorporated homeowners’ association (“SVC”) and
PVC entered into loan agreements to borrow up to $350,000 and $900,000,
respectively, at an interest rate of 6.15% to finance renovations and the
purchase of certain equipment for resort operations.  The borrowings
have a maturity date of March 31, 2011.  The Company has guaranteed
the borrowings, including interest, for both SVC and PVC and has entered into a
Guarantee Fee Agreement with SVC and PVC under which it received a guarantee fee
of 1.0% of the maximum principal amount under the loan
agreements.  The amounts outstanding under the loan agreements as of
March 31, 2009 were $833,333.





Seasonality





The
Company’s revenues are moderately seasonal with the volume of ILX owners, hotel
guests and Vacation Ownership Interest exchange participants typically greatest
in the second and third fiscal quarters.  Also impacting revenues are
inclement weather, forest fires, gasoline prices and other unforeseen natural
disasters.  As the Company expands into new markets and geographic
locations it may experience increased or additional seasonality dynamics which
may cause the Company’s operating results to fluctuate.





Inflation





Inflation
and changing prices have not had a material impact on the Company’s revenues,
operating income and net income during any of the Company’s three most recent
fiscal years or the three months ended March 31, 2009.  However, to
the extent inflationary trends affect interest rates, a portion of the Company’s
debt service costs may be affected as well as the rates the Company charges on
its Customer Notes.





Item
3. Quantitative and Qualitative Disclosures about Market Risk





The
Company currently derives a portion of income from the spread between the
interest rates charged to customers and the interest rates at which it borrows
against customer notes or at which it sells customer notes.  The
Company’s indebtedness bears interest at variable rates while the retained
customer notes bear interest at fixed rates.  As a result, increases
in interest rates could cause interest expense to exceed interest income on the
Company’s portfolio of retained customer notes.  The Company does not
currently engage in interest rate hedging transactions.  Therefore,
any change in the prime interest rate could have a material effect on results of
operations, liquidity and financial position.  If there were a
one-percentage point change in the prevailing prime rate at March 31, 2009, then
based on the $18.5 million balance of variable rate debt at March 31, 2009,
interest expense would increase or decrease by approximately $185,000 (before
income taxes) per annum.





Item
4T. Controls
and Procedures





(a)  Evaluation
of Disclosure Controls and Procedures





The
Company has established disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”)) to ensure that material information relating to the Company is made known
to the officers who certify the Company’s financial reports and to other members
of senior management and the Board of Directors. These disclosure controls and
procedures are designed to ensure that information required to be disclosed in
the reports that are filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's (“SEC”) rules and forms. Under the
supervision and with the participation of management, including the principal
executive officer and principal financial officer an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures as of March 31, 2009 was completed based on criteria established
in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”).  Based on this evaluation, the principal
executive officer and principal financial officer concluded that the Company’s
disclosure controls and procedures are functioning effectively.





19





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)




(b)  Changes
in Internal Control over Financial Reporting





There was
no change in the Company’s internal control over financial reporting during the
Company’s most recently completed fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.





Part
II





Item
      1.
            Legal
      Proceedings





As
discussed in Note 1, the Company and certain of its subsidiaries and limited
liability companies are debtors in possession in the Chapter 11
case.





Other
litigation has arisen in the normal course of the Company’s business, none of
which is deemed to be material.





Item
      1A.
            Risk
      Factors





Not
applicable





Item
      2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds





(C)




ISSUER PURCHASES OF EQUITY
      SECURITIES(a) Total Number of Shares (or
      Units) purchased
                                  (b) Average Price Paid per Share
      (or Unit)
                                  (c) Total Number of Shares (or
      Units) Purchased as Part of Publicly Announced Plans or
      Programs
                                  (d) Maximum Number (or Approximate
      Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the
      Plans or ProgramsPeriodJanuary 1, 2009
      -
                                    January 31,
      2009
                                  -
                                  -
                                  -
                                  -February 1, 2009
      -
                                    February 28,
      2009
                                  -
                                  -
                                  -
                                  -March 1, 2009
-
                                    March 31,
    2009
                                  -
                                  -
                                  -
                                  -Total
                                  -
                                  -
                                  -
                                  -








Item
      3.
            Defaults
      Upon Senior Securities





None





20





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS


(CONTINUED)





Item
      4.
            Submission
      of Matters to a Vote of Security
Holders





None








Item
      5.
            Other
      Information





None





Item
      6.
            Exhibits





(i)
            Exhibits





Exhibit
      No.
            Description31
            CERTIFICATION
      PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE
      SARBANES-OXLEY ACT OF 200232
            CERTIFICATION
      PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
      SARBANES-OXLEY ACT OF 2002







21





SIGNATURES










Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused 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. MartoriJoseph
      P. MartoriChief
      Executive Officer














/s/
      Nancy J. StoneNancy
      J. StoneVice
      Chairman & President














/s/
      Margaret M. EardleyMargaret
      M. EardleyExecutive
      Vice President & Chief Financial
Officer














/s/
      Taryn L. ChmielewskiTaryn
      L. ChmielewskiVice
      President & Corporate
Controller














Date:  As
of May 14, 2009




22