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 June 30,
      2008
            Commission
      File Number 001-13855





ILX
RESORTS INCORPORATED


(Exact
name of registrant as specified in its charter)





ARIZONA
            
            86-0564171(State
      or other jurisdiction of
            
            (IRS
      Employer Identification Number)incorporation
      or organization)





2111 East Highland Avenue,
Suite 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 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.
              o
              Yes
              x
              No








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





Class
            
            Outstanding at June 30,
  2008Common
      Stock, without par value
            
            3,655,963
      shares

















ITEM
1.  FINANCIAL STATEMENTS





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)




December
      31,
              
              
              June
      30,2007
              
              
              2008ASSETSCash
      and cash equivalents, including restricted cash of $101,113 and $0,
      respectively
              
              $
              3,332,922
              
              
              $
              3,262,167Notes
      receivable, net of allowance for uncollectible notesof $3,801,902 and $4,153,175, respectively
              
              
              35,369,404
              
              
              
              34,365,074Resort
      property held for Vacation Ownership Interest sales
              
              
              18,655,976
              
              
              
              21,171,751Resort
      property under development
              
              
              4,659,865
              
              
              
              1,936,752Land
      held for sale
              
              
              585,511
              
              
              
              586,681Property
      and equipment, net
              
              
              20,003,338
              
              
              
              20,013,765Other
      assets
              
              
              2,611,469
              
              
              
              3,019,378TOTAL
      ASSETS
              
              $
              85,218,485
              
              
              $
              84,355,568LIABILITIES
      AND SHAREHOLDERS' EQUITYLIABILITIES:Accounts payable
              
              $
              1,409,993
              
              
              $
              1,096,817Accrued expenses and other liabilities
              
              
              3,784,582
              
              
              
              3,988,600Income tax payable
              
              
              44,232
              
              
              
              -Notes payable
              
              
              37,353,072
              
              
              
              38,219,724Note payable affiliate
              
              
              600,000
              
              
              
              -Deferred income taxes
              
              
              3,830,318
              
              
              
              3,300,954TOTAL
      LIABILITIES
              
              
              47,022,197
              
              
              
              46,606,095MINORITY
      INTERESTS
              
              
              2,032,716
              
              
              
              2,007,201COMMITMENTS
      AND CONTINGENCIESSHAREHOLDERS'
      EQUITYPreferred 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;5,477,257 and
      5,582,259 shares issued and outstanding, respectively
              
              
              29,018,839
              
              
              
              29,328,679Treasury stock, at cost, 1,925,496 and 1,926,296 shares,
      respectively
              
              
              (9,973,257
              )
              
              
              (9,975,726
              )Additional paid-in capital
              
              
              59,435
              
              
              
              59,435Deferred
      compensation
              
              
              (265,513
              )
              
              
              (186,614
              )Retained earnings
              
              
              16,577,403
              
              
              
              15,769,833TOTAL SHAREHOLDERS' EQUITY
              
              
              36,163,572
              
              
              
              35,742,272TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
              
              $
              85,218,485
              
              
              $
              84,355,568






See notes
to condensed consolidated financial statements.




2




ILX
      RESORTS INCORPORATED AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)Three
      months ended June 30,
              
              
              Six
      months ended June 30,2007
              
              
              2008
              
              
              2007
              
              
              2008REVENUES:Sales of Vacation Ownership Interests
              
              $
              6,948,324
              
              
              $
              5,448,207
              
              
              $
              13,094,557
              
              
              $
              10,721,854Estimated uncollectible revenue
              
              
              (301,898
              )
              
              
              (238,122
              )
              
              
              (570,449
              )
              
              
              (469,608
              )Resort operating revenue
              
              
              5,100,514
              
              
              
              5,368,230
              
              
              
              9,506,801
              
              
              
              10,104,115Interest and finance income
              
              
              891,636
              
              
              
              873,181
              
              
              
              1,775,628
              
              
              
              1,518,612Total
      revenues
              
              
              12,638,576
              
              
              
              11,451,496
              
              
              
              23,806,537
              
              
              
              21,874,973COST
      OF SALES AND OPERATING EXPENSES:Cost of Vacation Ownership Interests sold
              
              
              819,889
              
              
              
              722,302
              
              
              
              1,664,950
              
              
              
              1,399,417Cost of resort operations
              
              
              4,456,839
              
              
              
              4,641,677
              
              
              
              8,605,659
              
              
              
              8,964,718Sales and marketing
              
              
              4,752,052
              
              
              
              3,923,322
              
              
              
              9,344,489
              
              
              
              7,778,068General and administrative
              
              
              1,390,572
              
              
              
              1,529,785
              
              
              
              3,062,963
              
              
              
              3,209,700Depreciation and amortization
              
              
              380,636
              
              
              
              284,072
              
              
              
              744,006
              
              
              
              608,455Total cost of sales
      and operating expenses
              
              
              11,799,988
              
              
              
              11,101,158
              
              
              
              23,422,067
              
              
              
              21,960,358Timeshare
      and resort operating income (loss)
              
              
              838,588
              
              
              
              350,338
              
              
              
              384,470
              
              
              
              (85,385
              )Income
      from land and other, net (including Related Party)
              
              
              54,273
              
              
              
              12,448
              
              
              
              89,522
              
              
              
              46,178Total
      operating income (loss)
              
              
              892,861
              
              
              
              362,786
              
              
              
              473,992
              
              
              
              (39,207
              )Interest
      expense
              
              
              (656,617
              )
              
              
              (643,893
              )
              
              
              (1,326,347
              )
              
              
              (1,309,717
              )Income
      (loss) before income taxes and minority interest
              
              
              236,244
              
              
              
              (281,107
              )
              
              
              (852,355
              )
              
              
              (1,348,924
              )Income
      tax (expense) benefit
              
              
              (94,498
              )
              
              
              107,467
              
              
              
              340,902
              
              
              
              529,364Income
      (loss) before minority interest
              
              
              141,746
              
              
              
              (173,640
              )
              
              
              (511,453
              )
              
              
              (819,560
              )Minority
      interest in loss of consolidated subsidiary
              
              
              -
              
              
              
              12,442
              
              
              
              -
              
              
              
              25,515NET
      INCOME (LOSS)
              
              $
              141,746
              
              
              $
              (161,198
              )
              
              $
              (511,453
              )
              
              $
              (794,045
              )NET
      INCOME (LOSS) PER SHARE:Total Basic net income (loss) per share
              
              $
              0.04
              
              
              $
              (0.05
              )
              
              $
              (0.15
              )
              
              $
              (0.22
              )Total Diluted net income (loss) per share
              
              $
              0.04
              
              
              $
              (0.05
              )
              
              $
              (0.15
              )
              
              $
              (0.22
              )DIVIDENDS
      PER SHARE
              
              $
              0.125
              
              
              $
              -
              
              
              $
              0.25
              
              
              $
              -






See notes
to condensed consolidated financial statements.




3





ILX
RESORTS INCORPORATED AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




Six
      months ended June 30,2007
              
              
              2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net loss
              
              $
              (511,453
              )
              
              $
              (794,045
              )Adjustments to reconcile net loss to net cash used inoperating
      activities:Loss on sale of
      property and equipment
              
              
              15,353
              
              
              
              972Gain of sale of
      investment in common stock
              
              
              (29,327
              )
              
              
              -Minority interest
      in net loss
              
              
              -
              
              
              
              (25,515
              )Income tax
      benefit
              
              
              (340,902
              )
              
              
              (529,364
              )Estimated
      uncollectible revenue
              
              
              570,449
              
              
              
              469,608Depreciation and
      amortization
              
              
              744,006
              
              
              
              608,455Amortization of
      deferred compensation
              
              
              125,028
              
              
              
              88,739Change in assets
      and liabilities:Decrease in notes
      receivable, net
              
              
              526,489
              
              
              
              534,722Decrease (increase) in resort
      property held for Vacation OwnershipInterest sales
              
              
              780,747
              
              
              
              (2,515,775
              )(Increase)
      decrease in resort property under development
              
              
              (3,116,915
              )
              
              
              2,723,113Increase in
      land held for sale
              
              
              (10,174
              )
              
              
              (1,170
              )Increase in
      other assets
              
              
              (728,137
              )
              
              
              (504,304
              )Increase
      (decrease) in accounts payable
              
              
              310,954
              
              
              
              (313,176
              )Increase in
      accrued and other liabilities
              
              
              1,303,258
              
              
              
              204,018Decrease in
      deferred income taxes
              
              
              (18,760
              )
              
              
              -Decrease in
      income taxes payable
              
              
              (530,627
              )
              
              
              (44,232
              )Net cash used in operating activities
              
              
              (910,011
              )
              
              
              (97,954
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
              
              
              (1,356,590
              )
              
              
              (523,459
              )Proceeds from sale of investment in common stock
              
              
              29,327
              
              
              
              -Proceeds from sale of property and equipment
              
              
              11,383
              
              
              
              -Assumption of First Piggy LLC membership interests
              
              
              -
              
              
              
              33,263Net
      cash used in investing activities
              
              
              (1,315,880
              )
              
              
              (490,196
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds from notes payable
              
              
              6,697,511
              
              
              
              6,542,479Principal payments on notes payable
              
              
              (5,829,772
              )
              
              
              (5,675,827
              )Principal payment on note payable to affiliate
              
              
              -
              
              
              
              (300,000
              )Preferred stock dividends
              
              
              (46,788
              )
              
              
              (46,788
              )Acquisition of treasury stock
              
              
              (357,090
              )
              
              
              (2,469
              )Common stock dividend
              
              
              (548,232
              )
              
              
              -Net
      cash (used in) provided by financing activities
              
              
              (84,371
              )
              
              
              517,395DECREASE
      IN CASH AND CASH EQUIVALENTS
              
              
              (2,310,262
              )
              
              
              (70,755
              )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              5,583,721
              
              
              
              3,332,922CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              3,273,459
              
              
              $
              3,262,167SUPPLEMENTAL
      DISCLOSURE OF NONCASHINVESTING AND
      FINANCING ACTIVITIES:Value of
      dividend shares issued under DRIP plan
              
              $
              452,325
              
              
              $
              -Deferred
      compensation resulting from unvested common stock issuance
              
              
              267,648
              
              
              
              9,840Common 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


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




Note
1. 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, 2007, 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 six-month period ended
June 30, 2008 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2008.  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.





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 June 30,
              
              
              Six
      Months Ended June 30,2007
              
              
              2008
              
              
              2007
              
              
              2008Interest
      paid
              
              $
              656,617
              
              
              $
              643,893
              
              
              $
              1,326,347
              
              
              $
              1,313,794Income
      taxes paid
              
              
              296,119
              
              
              
              11,816
              
              
              
              706,386
              
              
              
              44,232Interest
      capitalized
              
              
              308,611
              
              
              
              262,151
              
              
              
              580,896
              
              
              
              532,936





5


ILX
RESORTS INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)





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 no longer able to account for share-based compensation
transactions using the intrinsic method in accordance with APB Opinion No. 25.
Instead, 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. The Company had no unvested options at June 30,
2008.





Reclassification





The financial statements for the prior
period have been reclassified to be consistent with the current period financial
statement presentation.  The reclassification had no effect on net
income.





Note 2. Basic and Diluted Net Loss
Per Share





Three
      Months Ended
              
              
              Six
      Months EndedJune
      30,
              
              
              June
      30,2007
              
              
              2008
              
              
              2007
              
              
              2008Net
      income (loss)
              
              $
              141,746
              
              
              $
              (161,198
              )
              
              $
              (511,453
              )
              
              $
              (794,045
              )Less:
      Series A preferred stock dividends
              
              
              (11,697
              )
              
              
              (11,697
              )
              
              
              (23,394
              )
              
              
              (23,394
              )Basic
      and Diluted Net Income (Loss) Available to Common
    Shareholders
              
              $
              130,049
              
              
              $
              (172,895
              )
              
              $
              (534,847
              )
              
              $
              (817,439
              )Basic
      Weighted-Average Common Shares Outstanding
              
              
              3,509,630
              
              
              
              3,656,823
              
              
              
              3,500,545
              
              
              
              3,637,920Effect
      of dilutive securities:Stock
      options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Diluted
      Weighted-Average Common Shares Outstanding
              
              
              3,509,630
              
              
              
              3,656,823
              
              
              
              3,500,545
              
              
              
              3,637,920Basic
      Net Income (Loss) Per Common Share
              
              $
              0.04
              
              
              $
              (0.05
              )
              
              $
              (0.15
              )
              
              $
              (0.22
              )Diluted
      Net Income (Loss) Per Common Share
              
              $
              0.04
              
              
              $
              (0.05
              )
              
              $
              (0.15
              )
              
              $
              (0.22
              )


Stock
options to purchase 25,000 shares of common stock at a price of $9.90 per share
were outstanding at June 30, 2008 and 2007, but were not included in the
computation of diluted net income per share because their effect would be
anti-dilutive.  These options expire in 2009.





Note
3. Shareholders’ Equity





During the six months ended June 30,
2008, the Company issued 6,000 shares of common stock, valued at $17,376 to
employees under the Stock Bonus Plan.  These shares have voting rights
and therefore are included in shares outstanding.  The 6,000 shares
are contingent upon the recipients being employed by the Company on January 15,
2011.  The $17,376 deferred expense is being amortized pro-rata over
the vesting period and the unrecognized portion is included in deferred
compensation on the condensed consolidated balance sheet.  Deferred
compensation of $7,536, representing 1,000 shares issued in January 2007 was
reversed in the six months ended June 30, 2008 due to the termination of Stock
Bonus Plan participants prior to vesting in the shares.  The Company
also issued 100,002 restricted common shares valued at the fair value of
$300,000 to six former members of First Piggy LLC as partial repayment of a
$600,000 note payable to affiliates.








6


ILX
RESORTS INCORPORATED AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




In December 2002, the Company announced
an annual cash dividend of $0.40 per common share to be paid in equal quarterly
installments, payable on the tenth day of the calendar month following the end
of each calendar quarter, to common shareholders of record as of the last day of
each calendar quarter in 2003.  The Company continued to pay the
dividend each year and for 2007 the dividend was established at $0.50 per common
share to be paid in equal quarterly installments of $0.125.  In
December 2007, the dividend was discontinued and no payment was made for the
fourth quarter 2007.  In March 2003, the Company adopted the ILX
Resorts Incorporated Dividend Reinvestment Plan (“DRIP”).  The DRIP
was amended and restated in March 2006.  Under the terms of the DRIP,
shareholders could elect to reinvest dividends in shares of the Company’s common
stock, with no brokerage or other fees to the shareholder.





Note
4.  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, or who may be expected to contribute
materially in the future, to the success of the Company.  The exercise
price of the options granted pursuant to the 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.





A
summary of the non-vested stock under the Stock Bonus Plan at June 30, 2008
follows:




Non-Vested
      Shares
            
            
            Weighted
      Average Grant Date Fair ValueNon-vested
      at December 31, 2007
            
            
            93,000
            
            
            
            $7.83Stock
      Granted
            
            
            6,000
            
            
            
            2.90Stock
      Vested
            
            
            (26,000
            )
            
            
            7.70Stock
      Forfeited
            
            
            (1,000
            )
            
            
            7.54Non-vested
      at June 30, 2008
            
            
            72,000
            
            
            
            $7.48




Deferred compensation of $42,495 and
$88,739 was amortized in the three and six months ended June 30, 2008,
respectively.  Unamortized deferred compensation of $186,614 will be
amortized over the weighted average remaining term of 1.37 years.  The
value of the non-vested stock under the Stock Bonus Plan at June 30, 2008 is
$190,080.








7


ILX
RESORTS INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




Note
5. Related Party Transactions





During
the six months ended June 30, 2008, the Company’s wholly owned subsidiary,
Genesis Investment Group, Inc. (“Genesis”), recorded the sale of 33 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.  A gain of $30,295 was recorded on
the sale.  At June 30, 2008, deeds of trust for 642 of the Vacation
Ownership Interests secure outstanding indebtedness from PVC to Genesis of
$1,468,345 which is included in notes receivable.





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 June
30, 2008.  ILX-Bruno is included in the Company’s condensed
consolidated financial statements as of June 30, 2008 with Bruno’s capital
contributions net of operating losses included as Minority Interests on the
accompanying condensed consolidated balance sheets.





At
December 31, 2007, a note payable to former First Piggy LLC members in the
principal amount of $600,000 (bearing interest at 8.0%) was outstanding,
together with interest payable in the amount of $4,077.  The note
provided for principal payments of $300,000 in each of 2008 and
2009.  In February 2008, $300,000 of the note payable was satisfied
through the issuance of 100,002 shares of the Company’s common stock, and the
remaining $300,000 principal plus accrued interest was paid in
cash.





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 to receive a guarantee fee of 1% of the
maximum principal amount under the loan agreements.





Note
6. Commitments and Contingencies





Legal
Proceedings





In
October 2005, The Greens of Las Vegas, Inc. (“GOLV”) filed suit against the
Company, VCA-Nevada (“VCA-NV”), Greens Worldwide Incorporated (“GWWI”) and all
of the directors of GWWI from 2003 to the present.  GOLV alleged that
the Company interfered with prospective advantages between GOLV and third
parties, interfered with contracts between GOLV and VCA-NV, fraud, unjust
enrichment and civil conspiracy.  All Defendants answered the
Complaint on March 16, 2006 and asserted various counterclaims.  In
February 2008, the Nevada trial court granted the Company’s Motion to Dismiss
the Complaint and in April 2008 reaffirmed its decision and awarded that GOLV
pay the Company’s attorneys’ fees in the amount of $626,000.  The
counterclaims of the Company against the Plaintiffs still
remained.  GOLV appealed to the Nevada Supreme Court and, at a
mandatory settlement conference in June 2008, the parties agreed to settle the
entire matter with prejudice.  The Company dismissed its counterclaims
and agreed not to execute the attorneys’ fees judgment among other
things.  GOLV dismissed its claims against all Defendants and the
pending appeals.





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







8




MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)


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.  Such statements are
subject to substantial risks and uncertainties that could cause actual results
to differ materially from those projected, including, without limitation, the
risks and uncertainties set forth below.  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 eight
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”).  One of the resorts in Arizona is
not at this time registered with the Arizona Department of Real Estate nor is
being marketed for sale as Vacation Ownership Interests, and is operated under a
long-term lease arrangement.  The Company also owns 2,184 Vacation
Ownership Interests in a resort in Las Vegas, Nevada, 2,127 of which have been
annexed into Premiere Vacation Club, 193 Vacation Ownership Interests in a
resort in Pinetop, Arizona, 191 of which have been annexed into Premiere
Vacation Club and 176 Vacation Ownership Interests in a resort in Phoenix,
Arizona, all of which have been annexed into Premiere Vacation
Club.





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, 2007, 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 six-month period ended
June 30, 2008 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2008.  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 and Mexico.








9


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)


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 is effective for the Company as of
January 1, 2008.  In February 2008, the FASB issued FASB Staff
Position No. 157-2 (FSP 157-2); which extended the effective date for certain
nonfinancial assets and nonfinancial liabilities to fiscal years beginning after
November 15, 2008.  The adoption of the portions of SFAS 157 that were
not postponed by FSP 157-2 did not have a material impact on the Company’s
consolidated financial statements.  Adoption of the postponed portions
of SFAS 157 is not anticipated to cause a material change in financial position
or results of operations.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS
159), which allows an irrevocable election to measure certain financial assets
and financial liabilities at fair value on an instrument-by-instrument basis,
with unrealized gains and losses recognized currently in earnings. Under SFAS
159, the fair value option may only be elected at the time of initial
recognition of a financial asset or financial liability or upon the occurrence
of certain specified events. Additionally, SFAS 159 provides that application of
the fair value option must be based on the fair value of an entire financial
asset or financial liability and not selected risks inherent in those assets or
liabilities. SFAS 159 requires that assets and liabilities which are measured at
fair value pursuant to the fair value option be reported in the financial
statements in a manner that separates those fair values from the carrying
amounts of similar assets and liabilities which are measured using another
measurement attribute. SFAS 159 also provides expanded disclosure requirements
regarding the effects of electing the fair value option on the financial
statements. SFAS 159 was effective prospectively for fiscal years beginning
after November 15, 2007.  The adoption of this standard did not have a
material effect on the Company’s financial position or results of
operations.





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141(R) Business Combinations (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 Company is currently evaluating the impact the
adoption of these standards will have on the Company’s financial position or
results of operations.





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 is not expected to have a
material effect on the Company’s financial position or results of
operations.








10


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 Ended June 30,
                
                
                Six
      Months Ended June 30,2007
                
                
                2008
                
                
                2007
                
                
                2008As
      a percentage of total revenues:Sales of Vacation Ownership Interests
                
                
                55.0
                %
                
                
                47.6
                %
                
                
                55.0
                %
                
                
                49.0
                %Estimated uncollectible revenue
                
                
                (2.4
                )%
                
                
                (2.1
                )%
                
                
                (2.4
                )%
                
                
                (2.1
                )%Resort operating revenue
                
                
                40.4
                %
                
                
                46.9
                %
                
                
                40.0
                %
                
                
                46.2
                %Interest and finance income
                
                
                7.0
                %
                
                
                7.6
                %
                
                
                7.4
                %
                
                
                6.9
                %Total revenues
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %As
      a percentage of sales of Vacation Ownership Interests(1):Cost of Vacation Ownership Interests sold
                
                
                12.3
                %
                
                
                13.9
                %
                
                
                13.3
                %
                
                
                13.6
                %Sales and marketing
                
                
                71.5
                %
                
                
                75.3
                %
                
                
                74.6
                %
                
                
                75.9
                %Contribution margin percentage from sale of VacationOwnership Interests
      (2)
                
                
                16.2
                %
                
                
                10.8
                %
                
                
                12.1
                %
                
                
                10.5
                %As
      a percentage of resort operating revenue:Cost of resort operations
                
                
                87.4
                %
                
                
                86.5
                %
                
                
                90.5
                %
                
                
                88.7
                %As
      a percentage of total revenues(1):General and administrative
                
                
                11.0
                %
                
                
                13.4
                %
                
                
                12.9
                %
                
                
                14.7
                %Depreciation and amortization
                
                
                3.0
                %
                
                
                2.5
                %
                
                
                3.1
                %
                
                
                2.8
                %Total operating income (loss)
                
                
                7.1
                %
                
                
                3.2
                %
                
                
                2.0
                %
                
                
                (0.2
                )%Selected
      operating data:Vacation Ownership Interests sold (3)
      (4)
                
                
                306
                
                
                
                256
                
                
                
                567
                
                
                
                471Average sales price per Vacation Ownership Interestsold (excluding
      revenues from Upgrades) (4)
                
                $
                17,412
                
                
                $
                16,687
                
                
                $
                17,690
                
                
                $
                17,294Average sales price per Vacation Ownership Interestsold (including
      revenues from Upgrades) (4)
                
                $
                21,820
                
                
                $
                20,772
                
                
                $
                22,183
                
                
                $
                22,195


(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 446 and 382 biennial and annual Vacation
Ownership Interests for the three months ended June 30, 2007 and 2008,
respectively and 829 and 730 biennial and annual Vacation Ownership Interests
for the six months ended June 30, 2007 and 2008,
respectively.  Excludes the number of conversions and
upgrades.





11


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)




Comparison
of the Three and Six Months Ended June 30, 2007 to the Three and Six Months
Ended June 30, 2008





Sales of
Vacation Ownership Interests decreased 21.6% or $1,436,341 to $5,210,085 for the
three months ended June 30, 2008, from $6,646,426 for the same period in 2007
and decreased 18.1% or $2,271,862 to $10,252,246 for the six months ended June
30, 2008 from $12,524,108 for the same period in 2007.  The decrease
reflects reduced sales from the Rancho Mañana and Sedona sales offices due to
the closure of the Rancho Mañana sales office in June 2007 and decreased tours
in Sedona in large part as a result of major road construction, offset by
increased sales at the Tucson sales office due to greater tours in
2008.





The
average sales price per Vacation Ownership Interest sold (excluding revenues
from Upgrades) decreased 4.2% or $725 to $16,687 for the three months ended June
30, 2008 from $17,412 for the same period in 2007 and decreased 2.2% or $396 to
$17,294 for the six months ended June 30, 2008 from $17,690 for the same period
in 2007.  The decrease in average sales price is due to a change in
the product mix sold, including the introduction in March 2008 of a lower priced
product with more limited use features in anticipation of and in response to
decreased consumer disposable income due to economic conditions.  The
number of Vacation Ownership Interests sold decreased 16.3% from 306 in the
three months ended June 30, 2007 to 256 for the same period in 2008 and
decreased 16.9% from 567 for the six months ended June 30, 2007 to 471 for the
same period in 2008 primarily due to the closure of the Rancho Mañana sales
office discussed above and decreased tours at the Sedona sales
office.  The three and six months ended June 30, 2008 included 253 and
518 biennial Vacation Ownership Interests (counted as 126.5 and 259 annual
Vacation Ownership Interests) compared to 280 and 525 biennial Vacation
Ownership Interests (counted as 140 and 262.5 annual Vacation Ownership
Interests) in the same period in 2007.





Upgrade
revenue, included in Vacation Ownership Interest sales, decreased 22.6% to
$1,043,817 for the three months ended June 30, 2008 from $1,349,104 for the same
period in 2007 and decreased 9.3% to $2,308,236 for the six months ended June
30, 2008 from $2,545,229 for the same period in 2007.  The decrease in
2008 reflects the closure of the Rancho Mañana sales office which provided
proximate access to many existing owners in the Phoenix area, offset by
increased sales in other offices.  The average sales price per
Vacation Ownership Interest sold (including upgrades) decreased 4.8% or $1,048
to $20,772 for the three months ended June 30, 2008 from $21,820 in 2007 and was
consistent at $22,195 and $22,183 for the six months ended June 30, 2008 and
2007, respectively.  The decrease for the three months ended June 30,
2008 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 increased 5.2% to $5,368,230 for the three months ended June
30, 2008, from $5,100,514 for the same period in 2007 and increased 6.3% to
$10,104,115 for the six months ended June 30, 2008 from $9,506,801 for the same
period in 2007.  The increase reflects revenue from the operation of
the Sea of Cortez Premiere Vacation Club (which was previously operated by a
third party and the net effect of revenue less expenses charged to revenue)
beginning in July 2007, as well as increased revenue from Vacation Ownership
Interest owners.  Cost of resort operations as a percentage of resort
operating revenue decreased from 87.4% to 86.5% for the three months ended June
30, 2008 and decreased from 90.5% to 88.7% for the six months ended June 30,
2008, reflecting the increase in revenue from Vacation Ownership Interest
owners.





Interest
and finance income decreased 2.1% to $873,181 for the three months ended June
30, 2008 from $891,636 for the same period in 2007 and decreased 14.5% to
$1,518,612 for the six months ended June 30, 2008 from $1,775,628 for the same
period in 2007, reflecting decreased Customer Note balances, a reduction in
notes sold due to decreased sales 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 increased from 12.3% for the three months ended June 30, 2007 to 13.9% for
the three months ended June 30, 2008 and increased from 13.3% for the six months
ended June 30, 2007 to 13.6% for the six months ended June 30, 2008, due to the
introduction in March 2008 of a lower priced product and a decrease in the
forecasted average sales price.




12


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)




Sales and
marketing as a percentage of sales of Vacation Ownership Interests increased to
75.3% for the three months ended June 30, 2008 from 71.5% for the same period in
2007 and increased to 75.9% for the six months ended June 30, 2008 from 74.6%
for the same period in 2007, reflecting lower average sales prices in the Sedona
office net of the closure of the Rancho Mañana sales office in June
2007.





General
and administrative expenses increased to 13.4% and 14.7% of total revenue for
the three and six months ended June 30, 2008, from 11.0% and 12.9% for the same
periods in 2007.  The percentage increases reflect the reduction in
total revenue.  The $147,000 increase for the six months ended June
30, 2008 reflects a combination of the general and administrative expense
reductions implemented in late 2007 and early 2008, net of certain non-recurring
benefits in June 2007, increased legal expenses in 2008 related to the GOLV
lawsuit as well as redeployment of certain labor, previously utilized for
construction activities and capitalized, to other activities.





Income
from land and other, net decreased to $12,448 and $46,178 for the three and six
months ended June 30, 2008, respectively from $54,273 and $89,522 for the same
periods in 2007.  Included in second quarter 2007 was a gain of
$29,327 on the sale of 253,589 shares of GWWI common stock.





Interest
expense was comparable at $643,893 and $656,617 and $1,309,717 and $1,326,347
for the three and six months ended June 30, 2008 and 2007, respectively
reflecting reductions in rate on variable rate borrowings, net of increased
interest bearing obligations.





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.  For the six months ended June 30, 2008 and
2007, cash used in operations was $97,954 and $910,011,
respectively.  The decrease in cash used in operations reflects a net
decrease in resort property under development and resort property held for
Vacation Ownership Interest sales due to greater additions in 2007 for the
expansion of VCA South Bend, a smaller amount of cash paid for income taxes in
2008 and a decrease in other assets due to lower escrow balances resulting from
the repayment of a note payable using escrow funds in 2007.  These
decreases are offset by the larger net loss and resultant income tax benefit, a
decrease in accounts payable and a decrease in accrued liabilities due to timing
differences in amounts related to homeowner’s associations.





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.





At
December 31, 2007, the Company’s subsidiary, Genesis, had federal NOL
carryforwards of approximately $205,000, which are limited as to usage because
they arise from built in losses of an acquired company.  In addition,
such losses can only be utilized through the earnings of Genesis and are limited
to a maximum of $189,000 per year.  To the extent the entire $189,000
is not utilized in a given year, the difference may be carried forward to future
years.  Any unused Genesis NOLs will expire in 2008.





13


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)








Uses
of Cash





Investing
activities typically reflect a net use of cash because of capital
additions.  Net cash used in investing activities was $490,196 and
$1,315,880 for the six months ended June 30, 2008 and 2007,
respectively.  The decrease in net cash used in investing activities
in 2008 is due to reduced ILX-Bruno capital expenditures for projects in
Sedona.





Net cash
provided by financing activities in the six months ended June 30, 2008 was
$517,395 as compared to net cash used in financing activities of $84,371 in the
six months ended June 30, 2007.  The increase in cash provided by
financing activities reflects the payment of a dividend and greater purchases of
treasury shares in 2007, offset by the repayment in 2008 of a note payable to
affiliates.





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 in that notes which are more than 60 to 90
days past due are not eligible as collateral.  As a result, the
Company in effect must repay borrowings against such notes or buy back such
notes if they were sold with recourse.





Credit
Facilities and Capital





The
Company has a financing commitment aggregating $20 million whereby the Company
may borrow 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 June 30, 2008, approximately $7.6 million was
available under this commitment.





The
Company’s agreement with a financial institution for a commitment of $30
million, under which the Company sold certain of its Customer Notes expired in
June 2008. The agreement provided for sales on a recourse basis with a purchase
rate of prime plus 2.75%.  Customer Notes were sold at discounts or
premiums to the principal amount in order to yield the purchase rate, with the
premium held back by the financial institution as additional
collateral.





At June
30, 2008 and 2007, the Company had approximately $8.8 million and $11.0 million,
respectively, in outstanding notes receivable sold on a recourse
basis.  Portions of the notes receivable are secured by customer deeds
of trust on Los Abrigados Resort & Spa, VCA–South Bend and
VCA–Tucson.





In
January 2008, the Company amended an existing note payable due March 1, 2008 to
extend the maturity date to March 1, 2010.  All other terms remain
unchanged.




14


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)




In
February 2008, the Company amended an existing construction note payable to
provide an additional $1.9 million in financing, increase the interest rate by
1.0% to 10.0% per year and extend the maturity date to February
2013.





In March
2008, the Company amended its existing commitment pursuant to which the Company
may hypothecate Customer Notes that are pledged to the lender as
collateral.  The amendment extends the borrowing period through
December 2009, extends the maturity date to 2013 and decreases the maximum
borrowing amount to $20.0 million.





In May
2008, the Company amended an existing line of credit with a borrowing limit of
$1.0 million to extend the maturity date to August 30, 2008.





In June
2008, the Company amended an existing line of credit with a borrowing limit of
$1,750,000 to extend the maturity date to September 30, 2008.





In the
future, 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.  While the Company believes it
maintains excellent relationships with its lenders and will seek renewal or
replacement of existing lines upon their maturity, 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 may negotiate with additional lenders to
supplement its existing credit facilities.





The
Company believes available borrowing capacity, together with cash generated from
operations, will be sufficient to meet the Company’s liquidity, operating and
capital requirements for at least the next twelve months.





Off-Balance
Sheet Arrangements





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 to receive a guarantee fee of 1% of the
maximum principal amount under the loan agreements.





Contractual
Cash Obligations and Commercial Commitments





The
following table presents the Company’s contractual cash obligations and
commercial commitments as of June 30, 2008.  The Company also sells
consumer notes with recourse.  The Company has no other significant
contractual obligations or commercial commitments either on or off-balance sheet
as of this date, except as described below and in the Off-Balance Sheet
Arrangements section above.




Payments Due by
      PeriodContractual
      Cash Obligations
              
              Total
              
              
              <
      1 Year
              
              
              1-3
      Years
              
              
              4-5
      Years
              
              
              >
      5 YearsLong-term
      Debt
              
              $
              37,948,000
              
              
              $
              10,870,000
              
              
              $
              8,923,000
              
              
              $
              16,026,000
              
              
              $
              2,129,000Capital
      Lease Obligations
              
              
              272,000
              
              
              
              60,000
              
              
              
              135,000
              
              
              
              77,000
              
              
              
              -Operating
      Leases
              
              
              15,497,000
              
              
              
              1,881,000
              
              
              
              2,956,000
              
              
              
              2,133,000
              
              
              
              8,527,000Agreement
      to purchase VOI's
              
              
              44,000
              
              
              
              44,000
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
              
              $
              53,761,000
              
              
              $
              12,855,000
              
              
              $
              12,014,000
              
              
              $
              18,236,000
              
              
              $
              10,656,000





15


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)




Excluded
from the contractual cash obligations table is the amount of $1,154,000 under an
agreement to purchase Vacation Ownership Interests (“VOI’s”) because effective
April 1, 2008 the party to the agreement to purchase VOI’s has agreed to cancel
the obligation in exchange for the VOI’s.





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 six months ended June 30, 2008.  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 June 30, 2008, then
based on the $20.5 million balance of variable rate debt at June 30, 2008,
interest expense would increase or decrease by approximately $205,000 (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 June 30, 2008 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.











16


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





In
October 2005, The Greens of Las Vegas, Inc. (“GOLV”) filed suit against the
Company, VCA-Nevada (“VCA-NV”), Greens Worldwide Incorporated (“GWWI”) and all
of the directors of GWWI from 2003 to the present.  GOLV alleged that
the Company interfered with prospective advantages between GOLV and third
parties, interfered with contracts between GOLV and VCA-NV, fraud, unjust
enrichment and civil conspiracy.  All Defendants answered the
Complaint on March 16, 2006 and asserted various counterclaims.  In
February 2008, the Nevada trial court granted the Company’s Motion to Dismiss
the Complaint and in April 2008 reaffirmed its decision and awarded that GOLV
pay the Company’s attorneys’ fees in the amount of $626,000.  The
counterclaims of the Company against the Plaintiffs still
remained.  GOLV appealed to the Nevada Supreme Court and, at a
mandatory settlement conference in June 2008, the parties agreed to settle the
entire matter with prejudice.  The Company dismissed its counterclaims
and agreed not to execute the attorneys’ fees judgment among other
things.  GOLV dismissed its claims against all Defendants and the
pending appeals.





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





The
description of the risk factor labeled THE COMPANY MAY BE SUBJECT TO LITIGATION
WHICH COULD CAUSE IT TO INCUR SIGNIFICANT EXPENSES which was disclosed in the
Company’s form 10-K for the year ended December 31, 2007 should be deleted due
to the settlement of the litigation with GOLV and replaced with the
following:  We encounter litigation in our normal course of
business.  Responding to litigation claims could be costly and time
consuming and divert management’s attention from other business
issues.





There are
no other material changes from risk factors as previously disclosed in the
Company’s Form 10-K for the year ended December 31, 2007.








17


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)





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 ProgramsPeriodApril
      1, 2008 -April 30, 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -May
      1, 2008 - May 31, 2008
            
            
            800
            
            
            $
            3.09
            
            
            
            800
            
            
            
            749,200June
      1, 2008 - June 30, 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            749,200Total
            
            
            800
            
            
            $
            3.09
            
            
            
            800
            
            
            
            749,200






On May
13, 2008 the Company announced that it had received board of director approval
to repurchase up to 750,000 shares of common stock.





Item
      3.
            Defaults
      Upon Senior SecuritiesNone





Item
      4.
            Submission
      of Matters to a Vote of Security HoldersOn
      Wednesday, June 18, 2008, the Company held its Annual Meeting of
      Shareholders.  At this meeting, the Shareholders were asked to
      vote on the following proposal:To elect nine
      (9) directors to serve until the next annual meeting of Shareholders of
      the Company, or until their successors are duly elected and
      qualified.The
      voting results were as follows:Nominees
      recommended in the Proxy Statement:





Votes For
            
            Votes Against
            
            Votes WithheldSteven
      R. Chanen
            3,085,702
            
            0
            
            35,566Wayne
      M. Greenholtz
            3,085,311
            
            0
            
            35,956Joseph
      P. Martori
            2,744,072
            
            0
            
            377,195Joseph
      P. Martori, II
            2,728,379
            
            0
            
            392,889Patrick
      J. McGroder III
            3,086,281
            
            0
            
            34,987James
      W. Myers
            3,086,277
            
            0
            
            34,990Nancy
      J. Stone
            2,728,830
            
            0
            
            392,438Steven
      A. White
            3,069,894
            
            0
            
            51,374Edward
      S. Zielinski
            2,730,373
            
            0
            
            390,895





18


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (CONTINUED)





As a
result of the vote, the following nine directors will serve until the next
annual meeting or until his or her successor is elected and
qualified:





Steven R.
Chanen, Wayne M. Greenholtz, Joseph P. Martori, Joseph P. Martori, II, Patrick
J. McGroder III, James W. Myers, Nancy J. Stone, Steven A. White and Edward S.
Zielinski.





Item
      5.
            Other
      InformationNoneItem
      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 ADOPTEDPURSUANT
      TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002








19





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





















20