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, 1998             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 210, 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
                                                  ---            ---

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

                Class                           Outstanding at June 30, 1998
--------------------------------------          ----------------------------
   Common Stock, without par value                   4,216,893 shares
<PAGE>
                                     PART I

ITEM 1.   FINANCIAL STATEMENTS

                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                          December 31,      June 30,
                                                                              1997           1998
                                                                          ------------    ------------
                                                                                          (Unaudited)
<S>                                                                       <C>             <C>         
                                     ASSETS
     Cash and cash equivalents                                            $  3,226,038    $  3,173,778
     Notes receivable, net                                                  15,861,621      17,826,619
     Resort property held for Vacation Ownership Interest sales             14,666,658      20,610,309
     Resort property under development                                       2,943,936            --
     Land held for sale                                                      1,557,498       1,593,009
     Deferred assets                                                           289,009         254,227
     Property and equipment, net                                             3,472,899       4,034,114
     Deferred income taxes                                                     304,430            --
     Other assets                                                            1,400,224       1,698,131
                                                                          ------------    ------------

         TOTAL ASSETS                                                     $ 43,722,313    $ 49,190,187
                                                                          ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
     Accounts payable                                                     $  2,830,375    $  1,593,112
     Accrued and other liabilities                                           2,220,566       1,488,372
     Notes payable                                                          19,884,479      17,064,358
     Notes payable to affiliates                                             2,166,100       2,050,073
     Income taxes payable                                                         --           137,570
                                                                          ------------    ------------

         Total liabilities                                                  27,101,520      22,333,485
                                                                          ------------    ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

     Preferred stock, $10 par value; 10,000,000 shares authorized;
       380,468 shares issued and outstanding; liquidation preference of
       $  3,804,680                                                          1,384,891       1,384,891

     Common stock, no par value; 30,000,000 shares authorized;
       2,692,433 and 4,332,533 shares issued                                10,267,667      19,962,338

     Treasury stock, at cost, 103,060 and 115,640 shares                      (652,587)       (728,288)

     Additional paid in capital                                                 79,450          79,450

     Retained earnings                                                       5,541,372       6,158,311
                                                                          ------------    ------------

         Total shareholders' equity                                         16,620,793      26,856,702
                                                                          ------------    ------------

              TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  $ 43,722,313    $ 49,190,187
                                                                          ============    ============
</TABLE>
                 See notes to consolidated financial statements
                                        2
<PAGE>
                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                 Three months ended June 30,   Six months ended June 30,
                                                 ---------------------------   -------------------------
                                                      1997          1998          1997          1998
                                                   -----------   -----------   -----------   -----------
<S>                                                <C>           <C>           <C>           <C>        
TIMESHARE REVENUES:
     Sales of Vacation Ownership 
         Interests                                 $ 5,846,579   $ 5,686,991   $10,937,875   $11,247,814
     Resort operating revenue                        2,801,978     3,068,945     5,229,764     5,587,278
     Interest income                                   294,031       485,666       558,754       933,673
                                                   -----------   -----------   -----------   -----------
         Total timeshare revenues                    8,942,588     9,241,602    16,726,393    17,768,765
                                                   -----------   -----------   -----------   -----------

COST OF SALES AND OPERATING EXPENSES:
     Cost of Vacation Ownership
         Interests sold                                851,327       816,875     1,516,981     1,608,317
     Cost of resort operations                       2,550,141     2,933,587     5,094,727     5,548,727
     Sales and marketing                             3,332,044     3,488,551     6,141,997     6,819,821
     General and administrative                        676,755       617,308     1,470,402     1,277,680
     Provision for doubtful accounts                   170,823       167,913       317,593       330,182
     Depreciation and amortization                      95,198        97,892       208,278       184,510
                                                   -----------   -----------   -----------   -----------
Total cost of sales and operating 
     expenses                                        7,676,288     8,122,126    14,749,978    15,769,237
                                                   -----------   -----------   -----------   -----------

Timeshare operating income                           1,266,300     1,119,476     1,976,415     1,999,528

Income from land and other, net                          5,052         3,252         9,584        17,540
                                                   -----------   -----------   -----------   -----------

Total operating income                               1,271,352     1,122,728     1,985,999     2,017,068

Interest expense                                       472,177       401,618       935,762       907,133
                                                   -----------   -----------   -----------   -----------

Income before income taxes and 
     minority interests                                799,175       721,110     1,050,237     1,109,935

Income tax expense                                     281,884       289,000       352,457       445,000
                                                   -----------   -----------   -----------   -----------

Income before minority interests                       517,291       432,110       697,780       664,935

Minority interests                                      94,468          --         168,753          --
                                                   -----------   -----------   -----------   -----------

NET INCOME                                         $   422,823   $   432,110   $   529,027   $   664,935
                                                   ===========   ===========   ===========   ===========

NET INCOME PER SHARE

     Basic                                         $      0.15   $      0.10   $      0.19   $      0.19
                                                   ===========   ===========   ===========   ===========

     Diluted                                       $      0.15   $      0.10   $      0.19   $      0.19
                                                   ===========   ===========   ===========   ===========
</TABLE>
                 See notes to consolidated financial statements
                                        3
<PAGE>
                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                     Six months ended June 30,
                                                                     -------------------------
                                                                         1997           1998
                                                                     -----------    -----------
<S>                                                                  <C>            <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                       $   529,027    $   664,935
    Adjustments to reconcile net income to net cash provided by
       (used in) operating activities:
       Undistributed minority interest                                   168,478           --
       Deferred income taxes                                             316,359        442,000
       Provision for doubtful accounts                                   317,593        330,182
       Depreciation and amortization                                     208,278        184,510
       Amortization of guarantee fees                                     45,850         35,675
       Gain on settlement of liability                                   (98,705)          --
       Change in assets and liabilities:
          Decrease (increase) in resort property held for Vacation
               Ownership Interest sales                                  790,834     (2,999,715)
          Increase in resort property under development                 (137,539)          --
          Increase in land held for sale                                  (3,572)       (35,511)
          Increase in other assets                                      (173,161)      (235,207)
          Decrease in accounts payable                                  (531,466)    (1,237,263)
          Increase (decrease) in accrued and other liabilities           315,596       (608,073)
                                                                     -----------    -----------

Net cash provided by (used in) operating activities                    1,747,572     (3,458,467)
                                                                     -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Notes receivable, net                                             (2,660,127)    (2,295,180)
    Increase in deferred assets                                          (54,434)          (893)
    Purchases of property and equipment, net                              (2,570)      (733,425)
                                                                     -----------    -----------

Net cash used in investing activities                                 (2,717,131)    (3,029,498)
                                                                     -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable                                        1,238,048      7,040,435
    Principal payments on notes payable                               (2,016,166)    (9,860,556)
    Principal payments on notes payable to affiliates                   (137,433)      (157,627)
    Net proceeds from issuance of common stock                            39,875      9,537,150
    Redemption of common stock                                              --          (75,701)
    Preferred stock dividend payments                                         (7)       (47,996)
                                                                     -----------    -----------

Net cash (used in) provided by financing activities                     (875,683)     6,435,705
                                                                     -----------    -----------

DECREASE IN CASH AND CASH EQUIVALENTS                                 (1,845,242)       (52,260)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                       3,523,047      3,226,038
                                                                     -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                           $ 1,677,805    $ 3,173,778
                                                                     ===========    ===========
</TABLE>
                 See notes to consolidated financial statements
                                        4
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Business Activities

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

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and the  instructions  to Form  10-Q and  Rule  10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
notes  required  by  generally  accepted  accounting   principles  for  complete
financial  statements.  In  the  opinion  of  management,  all  adjustments  and
reclassifications  considered  necessary for a fair and comparable  presentation
have been included and are of a normal recurring  nature.  Operating results for
the three and six months ended June 30, 1998 are not  necessarily  indicative of
the results  that may be expected for the year ending  December  31,  1998.  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,  Florida, Indiana
and Mexico.  The Company's  operations  also include  marketing of skin and hair
care products, which are not considered significant to resort operations.

Reverse Stock Split

         On January 9, 1998, the Company's shareholders approved an amendment to
the Company's  Articles of Incorporation to effect a one-for-five  reverse stock
split of the  Company's  issued  and  outstanding  shares of common  stock.  The
reverse  stock  split  has  been  retroactively  reflected  in the  accompanying
financial statements.

Revenue Recognition

         Revenue from sales of Vacation  Ownership  Interests is  recognized  in
accordance with Statement of Financial  Accounting  Standard No. 66,  Accounting
for Sales of Real Estate ("SFAS 66"). No sales are recognized until such time as
a minimum of 10% of the purchase  price 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 and revenues from food and other resort services.
Such  revenues  are  recorded  as the  rooms  are  rented  or the  services  are
performed.

Consolidated Statements of Cash Flows

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

                       Three Months Ended June 30,    Six Months Ended June 30,
                       ---------------------------   --------------------------
                           1997            1998         1997            1998   
                       ----------       ----------   ----------      ----------
                                                                               
Interest paid          $  403,000       $  602,000   $  939,000      $1,141,000
Income taxes paid      $     --         $     --     $     --        $    3,000
Capitalized interest   $   40,000       $  178,000   $   86,000      $  323,000
                                                                              
                                        5
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                                   (continued)

Resort Property Under Development

         Resort property under development  totaling  $2,943,936 at December 31,
1997 was  reclassified as resort property held for Vacation  Ownership  Interest
Sales as of June 30, 1998 in  conjunction  with the  substantial  completion  of
construction. The resort opened to revenue paying guests in July 1998.

Accounting Matters

         In June 1997, the Financial  Accounting Standards Board issued SFAS No.
130,  "Reporting  Comprehensive  Income"  ("SFAS 130"),  which was effective for
financial   statements  for  periods  beginning  after  December  15,  1997  and
establishes  standards for reporting and display of comprehensive income and its
components   (revenues,   expenses,   gains  and   losses)  in  a  full  set  of
general-purpose  financial  statements.  The Company  adopted  SFAS 130 in 1998.
There were no items of other  comprehensive  income,  as that term is defined in
SFAS 130, in the three and six months ended June 30, 1997 or June 30, 1998.

         In June 1997, the Financial  Accounting Standards Board issued SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS
131"), which is effective for fiscal years beginning after December 15, 1997 and
establishes  standards  for the way  that  public  business  enterprises  report
information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim financial reports issued to shareholders.  It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers.

         In June 1998, the Financial  Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133"),
which is effective for the Company in 2000. SFAS No. 133 requires that an entity
recognize all  derivatives  as either assets or liabilities in the balance sheet
and measure those instruments at fair value. The standard also provides specific
guidance for accounting for derivatives  designated as hedging instruments.  The
Company is  currently  evaluating  what  impact this  standard  will have on its
financial statements.

Reclassifications

         The  financial  statements  for  1997  have  been  reclassified  to  be
consistent with the 1998 presentation.

Note 2. Notes Payable

         In June 1998,  the Company  entered  into a borrowing  agreement  under
which it may borrow up to $40 million against eligible  receivables through June
2002.  The terms of the  agreement  provide for  borrowing at prime plus 1.5% to
prime plus 1.75%,  with a maturity date of June 11, 2007. A commitment fee of 1%
is payable as amounts are advanced under the line.

         In June 1998, the Company  acquired  residential real estate in Sedona,
Arizona for $308,000  for which it paid  $58,000 in cash and  borrowed  $250,000
secured by a deed of trust.  The note bears  interest  at 8.5%,  and  matures in
2003.

Note 3. Net Income Per Share

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

                           Basic Net Income Per Share
<TABLE>
<CAPTION>
                                                  Three Months Ended June 30,    Six Months Ended June 30,
                                                  ---------------------------    -------------------------
                                                     1997            1998          1997           1998
                                                  -----------    -----------    -----------    -----------
<S>                                               <C>            <C>            <C>            <C>        
Net income                                        $   422,823    $   432,110    $   529,027    $   664,935
Less: Series A preferred stock dividends              (11,974)       (12,000)       (23,947)       (24,000)
Series C convertible preferred stock cumulation
    share dividends                                    (8,859)        (8,568)       (17,719)       (16,892)
                                                  -----------    -----------    -----------    -----------
Net income available to common stockholders -
    basic                                         $   401,990    $   411,542    $   487,361    $   624,043
                                                  ===========    ===========    ===========    ===========
Weighted average shares of common stock
    outstanding - basic                             2,614,396      4,047,463      2,609,737      3,331,751
                                                  ===========    ===========    ===========    ===========

Basic net income per share                        $      0.15    $      0.10    $      0.19    $      0.19
                                                  ===========    ===========    ===========    ===========
</TABLE>
                                       6
<PAGE>
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                                   (continued)

                          Diluted Net Income Per Share
<TABLE>
<CAPTION>
                                                   Three Months Ended June 30,    Six Months Ended June 30,
                                                   ---------------------------    -------------------------
                                                      1997            1998          1997           1998
                                                   -----------    -----------    -----------    -----------
<S>                                                <C>            <C>            <C>            <C>        
Net income                                          $   422,823    $   432,110    $   529,027    $   664,935
Less: Series A preferred stock dividends                (11,974)       (12,000)       (23,947)       (24,000)
                                                    -----------    -----------    -----------    -----------
Net income available to common stockholders -
    diluted                                         $   410,849    $   420,110    $   505,080    $   640,935
                                                    ===========    ===========    ===========    ===========
Weighted average shares of common stock
    outstanding                                       2,614,396      4,047,463      2,609,737      3,331,751
Add: Convertible preferred stock (Series B and C)
    dilutive effect                                     112,100        110,541        113,210        110,541
                                                    -----------    -----------    -----------    -----------
Weighted average shares of common stock
      outstanding - dilutive                          2,726,496      4,158,004      2,722,947      3,442,292
                                                    ===========    ===========    ===========    ===========

Diluted net income per share                        $      0.15    $      0.10    $      0.19    $      0.19
                                                    ===========    ===========    ===========    ===========
</TABLE>

         Stock options and warrants to purchase  157,200  shares of common stock
at prices  ranging from $6.75 per share to $8.125 per share were  outstanding at
June 30, 1998 but were not included in the computation of diluted net income per
share because the options' and warrants'  exercise  prices were greater than the
average  market price of common  shares.  These  options and warrants  expire at
various dates between 1998 and 2004.

Note 4. Shareholders' Equity

         During the first quarter of 1998,  the Company  issued 28,100 shares of
restricted  common  stock,  valued at $82,521,  to  employees  in  exchange  for
services provided. In February 1998, the Company issued 12,000 shares, valued at
$75,000,  to EVEREN  Securities,  Inc., for investment  banking and underwriting
services (see Note 5).

Note 5. Common Stock Offering

         In April 1998, the Company sold,  through a public offering,  1,400,000
shares of its common stock at a price of $6.75;  EVEREN  Securities,  Inc.,  the
underwriter  of the  offering,  also  exercised  its  overallotment  option  and
purchased an additional  200,000 shares at a price of $6.75,  for total proceeds
of $10,800,000.  Proceeds of the offering,  net of the costs of the underwriting
(including  a  7%  underwriting   discount,   professional  fees,  printing  and
promotional costs totaling $1,262,850), were recorded as common stock.

Note 6. Other

         In June 1998,  the Company  entered into an agreement to acquire  1,500
one-week, 25-year right-to-use Vacation Ownership Interests to be constructed on
land adjacent to a full service  resort in San Carlos,  Mexico.  Such  interests
will be contributed to Premiere  Vacation Club in exchange for  participation in
the profits of Premiere Vacation Club as provided in the agreement.

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" and similar
terms are  intended to identify  forward-looking  statements  that relate to the
Company's  future  performance.  Such  statements  are  subject  to  substantial
uncertainty.   Readers  are  cautioned  not  to  place  undue  reliance  on  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.
                                       7
<PAGE>
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations

Overview

         ILX  Resorts  Incorporated  was  formed in 1986 to enter  the  Vacation
Ownership  Interest  business.  The Company generates revenue primarily from the
sale and financing of Vacation Ownership  Interests.  The Company also generates
revenue  from the rental of its unused or unsold  inventory  of units at the ILX
Resorts and from the sale of food,  beverages or other services at such resorts.
The Company  currently  owns five resorts in Arizona,  one in Indiana and one in
Colorado.

         The Company  recognizes  revenue  from the sale of  Vacation  Ownership
Interests  at such  time as a  minimum  of 10% of the  purchase  price  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's  future  obligations  for the Vacation  Ownership  Interests have been
released.  Resort operating revenues are recorded as the rooms are rented or the
services are performed.

         Costs  associated  with the  acquisition  and  development  of Vacation
Ownership  Interests,  including  carrying costs such as interest and taxes, are
capitalized  and  amortized  to cost  of  sales  as the  respective  revenue  is
recognized.

Results of Operations

         The following  table sets forth certain  operating  information for the
Company:
<TABLE>
<CAPTION>
                                                 Three Months Ended June 30,        Six Months Ended June 30,
                                                 ---------------------------       ---------------------------
                                                     1997          1998                1997           1998
                                                 ------------   ------------       ------------   ------------
<S>                                                 <C>           <C>                 <C>             <C>   
As a percentage of total timeshare 
revenues:
     Sales of Vacation Ownership Interests           65.4%         61.5%               65.4%           63.3%
     Resort operating revenue                        31.3%         33.2%               31.3%           31.4%
     Interest income                                  3.3%          5.3%                3.3%            5.3%
                                                    ------        ------              ------          ------
     Total timeshare revenues                       100.0%        100.0%              100.0%          100.0%
                                                    ======        ======              ======          ======

As a percentage of sales of Vacation 
Ownership Interests:
     Cost of Vacation Ownership Interests 
         sold                                        14.6%         14.4%               13.9%           14.3%
     Sales and marketing                             57.0%         61.3%               56.2%           60.6%
     Provision for doubtful accounts                  2.9%          3.0%                2.9%            2.9%
     Contribution margin percentage from 
         sale of Vacation Ownership 
         Interests (1)                               25.5%         21.3%               27.1%           22.1%

As a percentage of resort operating 
revenue:
     Cost of resort operations                       91.0%         95.6%               97.4%           99.3%

As a percentage of total timeshare 
revenues:
     General and administrative                       7.6%          6.7%                8.8%            7.2%
     Depreciation and amortization                    1.1%          1.1%                1.2%            1.0%
     Timeshare operating income                      14.2%         12.1%               11.8%           11.3%
</TABLE>
                                        8
<PAGE>
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
                                   (continued)
<TABLE>
<CAPTION>
Selected operating data:
<S>    <C>                                            <C>           <C>                 <C>             <C>
     Vacation Ownership Interests sold (2) 
       (3)                                            382           386                 709             762
     Average sales price per Vacation 
         Ownership Interest sold (excluding 
         revenues from Upgrades) (2)              $13,181       $12,963             $13,021         $12,919
     Average sales price per Vacation 
         Ownership Interest sold (including 
         revenues from Upgrades) (2)              $15,305       $14,752             $15,427         $14,771
</TABLE>

-------------------------

(1)    Defined as: the sum of Vacation Ownership Interest sales less the cost of
       Vacation Ownership  Interests sold less sales and marketing expenses less
       a provision for doubtful accounts, divided by sales of Vacation Ownership
       Interests.

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

(3)    Vacation  Ownership  Interests consist of 178 annual and 408 biennial for
       the three  months ended June 30, 1997 and 180 annual and 411 biennial for
       the three months ended June 30, 1998, and 341 annual and 736 biennial for
       the six months  ended June 30, 1997 and 360 annual and 803  biennial  for
       the six months ended June 30, 1998.

Comparison  of the Three and Six Months Ended June 30, 1997 to the Three and Six
Months Ended June 30, 1998

         Sales of  Vacation  Ownership  Interests  decreased  3% or  $159,588 to
$5,686,991  for the three months ended June 30, 1998,  from  $5,846,579  for the
same period in 1997 and  increased  3% or $309,939  to  $11,247,814  for the six
months  ended June 30, 1998 from  $10,937,875  for the same period in 1997.  The
variations  in sales  reflect a decline  in sales from the South Bend and Sedona
sales  offices as a result of fewer tours  generated  to those  offices,  net of
sales from the Tucson sales  office,  which  opened in August 1997.  The average
sales price per  Vacation  Ownership  Interest  sold  (excluding  revenues  from
Upgrades) was comparable between periods.

         The number of Vacation Ownership Interests sold were comparable between
years for the three  months  ended June 30 and  increased  8% to 762 for the six
months  ended  June 30,  1998  from 709 for the same  period  in 1997.  Sales of
Vacation  Ownership  Interests  in the three and six months ended June 30, 1998,
included 411 and 803 biennial Vacation Ownership Interests (counted as 205.5 and
401.5  annual  Vacation  Ownership  Interests)  compared to 408 and 736 biennial
Vacation  Ownership  Interests (counted as 204 and 368 annual Vacation Ownership
Interests) for the same periods in 1997, respectively.

         The  decrease in tour flow to the South Bend sales  office in the first
half of 1998 was due to the  termination  of the  marketing  company  which  had
provided  the  majority  of  tours to the  sales  office,  in favor of  internal
generation of tours.  Fewer tours have been generated  during the transition and
start-up periods of these new programs. Tour flow to the Sedona sales office has
decreased  due to increasing  competition  for tours in the Phoenix  market.  In
response  to this  trend,  the Company  has sought  approval  in  California  to
generate  tours to its Sedona sales  office,  and such  approval was received in
July 1998. The Company  intends to begin  marketing into  California late in the
third quarter.

         Upgrade  revenue,   included  in  Vacation  Ownership  Interest  sales,
decreased 15% to $689,812 for the three months ended June 30, 1998 from $811,525
for the same period in 1997 and decreased  17% to $1,409,825  for the six months
ended June 30, 1998 from  $1,705,951 for the same period in 1997, as a result of
limiting other programs in anticipation of introduction of the Premiere Vacation
Club,  which  was  delayed  beyond  its  expected  start  date due to  delays in
regulatory  approval.  Approval  was  received  late in the second  quarter  and
marketing of this new product to existing  owners began in the last few weeks of
the quarter.  Also,  in 1997 a greater  proportion of Upgrades were by owners of
Golden Eagle Vacation  Ownership  Interests  which have a higher  trade-in value
than the Company's other properties.  Upgrades generally do not involve the sale
of  additional   Vacation  Ownership  Interests  (merely  their  exchange)  and,
therefore, such Upgrades increase the average sales
                                       9
<PAGE>
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
                                   (continued)

price per Vacation  Ownership  Interest sold. The reduced upgrade revenue due to
the delayed  Premiere  Vacation Club  promotion and the change in upgrade mix to
include  fewer Golden Eagle owners  resulted in lower  average  sales prices per
Vacation Ownership  Interest sold (including  Upgrades) of $14,752 for the three
months  ended June 30, 1998 from $15,305 for the same period in 1997 and $14,771
for the six months ended June 30, 1998 from $15,427 for the same period in 1997.

         Resort operating revenues increased 10% and 7% or $266,967 and $357,514
to $3,068,945 and $5,587,278 for the three and six month periods ending June 30,
1998, respectively, reflecting increases in sales of food and beverage and other
amenities at Kohl's Ranch Lodge and  increases in occupancy at Varsity  Clubs of
America - South Bend Chapter.

         The  increases in cost of resort  operations  as a percentage of resort
operating  revenue for both the three and six month  periods ended June 30, 1998
are a result of initial  operating  costs of  Varsity  Clubs of America - Tucson
Chapter, which opened to revenue paying guests in July 1998.

         Interest  income  increased  65% to $485,666 for the three months ended
June 30, 1998 from  $294,031  for the same period in 1997 and  increased  67% to
$933,673  for the six months  ended  June 30,  1998 from  $558,754  for the same
period in 1997 as a result of the  increase  in customer  notes  retained by the
Company and  increases in interest  rates charged by the Company on its customer
notes.

         Cost of Vacation  Ownership  Interests sold as a percentage of Vacation
Ownership Interest sales are comparable between periods.

         Sales and  marketing  as a  percentage  of sales of Vacation  Ownership
Interests increased to 61% for the three and six months ended June 30, 1998 from
57% and 56% for the same periods in 1997, respectively,  due to reduced tours to
the South Bend sales office as a result of transition  from the utilization of a
major  outside  vendor of tours to  internal  generation  of tours as  discussed
above,  and the increased  costs of generating  tours to the Sedona sales office
due in part to the inclement  weather  (during the first quarter of 1998) and in
part to increasing  costs of generating  tours from the Phoenix market.  In July
1998 the Company  received  regulatory  authority to market in California to its
Sedona  sales office and intends to begin  marketing  for the first time in that
state late in the third quarter.

         The  provision  for  doubtful  accounts  as a  percentage  of  Vacation
Ownership Interest sales remained comparable between years.

         General and  administrative  expenses  decreased 9% to $617,308 for the
three months  ended June 30, 1998 from  $676,755 for the same period in 1997 and
decreased  13% to  $1,277,680  for the six  months  ended  June  30,  1998  from
$1,470,402  for the same  period in 1997.  General and  administrative  expenses
decreased as a percentage  of total  timeshare  revenues to 7% for the three and
six months  ended June 30, 1998  compared  to 8% and 9% for the same  periods in
1997,  respectively.  These decreases were primarily due to the recognition of a
gain on the write off of an accrued  liability in the second quarter of 1998 and
a reduction in property tax expense  related to  successful  appeals of property
tax assessments in the first quarter of 1998.

         Interest  expense  decreased 15% to $401,618 for the three months ended
June 30,  1998 from  $472,177  for the same period in 1997 and  decreased  3% to
$907,133  for the six months  ended  June 30,  1998 from  $935,762  for the same
period in 1997,  reflecting  reductions in  borrowings in the second  quarter of
1998 from the use of proceeds of the follow-on  offering of the Company's common
stock, net of an increase in borrowings  against notes receivable as the Company
retains  and  borrows  against,  rather  than  sells,  a greater  portion of its
customer notes receivable.

         Income tax expense as a  percentage  of pre-tax  income net of minority
interests is comparable between years.

         The  elimination of minority  interests in 1998 is due to the buyout by
the Company of the LAP minority interest in August 1997.
                                       10
<PAGE>
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
                                   (continued)

Liquidity and Capital Resources

Sources of Cash

         The  Company  generates  cash  primarily  from  the  sale  of  Vacation
Ownership Interests (including  Upgrades),  the financing of customer notes from
such sales and resort operations.  During the six months ended June 30, 1997 and
1998,  cash provided by (used in) operations  was  $1,747,572 and  $(3,458,467),
respectively.  The negative cash flow for the six months ended June 30, 1998 was
due primarily to the  construction of Varsity Clubs of America - Tucson Chapter,
which  was  financed  in large  part  through  a  construction  loan  and  lease
financing.  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 a necessary part of its normal operations.

         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 installment  payments
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 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,  1997,  the  Company,   excluding  Genesis,  had  NOL
carryforwards  of $4.8  million,  which expire in 2001 through 2012. At December
31,  1997,  Genesis had federal NOL  carryforwards  of $1.9  million,  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.

         In addition,  Section 382 of the Code imposes additional limitations on
the  utilization of NOLs by a corporation  following  various types of ownership
changes,  which result in more than a 50% change in  ownership of a  corporation
within a  three-year  period.  Such  changes  may result  from new Common  Stock
issuances  by the Company or changes  occurring  as a result of filings with the
Securities  and Exchange  Commission of Schedules 13D and 13G by holders of more
than 5% of the Common Stock, whether involving the acquisition or disposition of
Common Stock. If such a subsequent change occurs, the limitations of Section 382
would  apply  and may  limit or deny the  future  utilization  of the NOL by the
Company, which could result in the Company paying substantial additional federal
and state taxes.

Uses of Cash

         Investing  activities  typically  reflect a net use of cash  because of
capital  additions  and loans to  customers  in  connection  with the  Company's
Vacation Ownership Interest sales. Net cash used in investing activities for the
six  months  ended  June  30,  1997  and 1998  was  $2,717,131  and  $3,029,498,
respectively.

         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.  During the six
months ended June 30, 1998 the Company was constructing Varsity Clubs of America
- Tucson  Chapter,  which was  complete in July 1998.  During that  period,  the
Company  borrowed  $3,438,076  on  its  construction  financing  commitment  and
$800,200 on its lease commitment for this property.

         Customer  defaults have a significant  impact on cash  available to the
Company from financing  customer notes  receivables in that notes which are more
than 60 to 90 days past due are not  eligible as  collateral.  As a 
                                       11
<PAGE>
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
                                   (continued)

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  agreements  with  financial  institutions  for total
commitments  aggregating  $25.0 million under which the Company may sell certain
of its customer notes.  These  agreements  provide for sales on a recourse basis
with a percentage of the amount sold held back by the financial  institution  as
additional  collateral.  Notes may be sold at discounts or premiums to yield the
consumer market rate as defined by the financial institution.  At June 30, 1998,
approximately $12.7 million was available under these commitments.

         The Company also has financing  commitments  aggregating  $42.0 million
whereby the Company may borrow against notes  receivable  pledged as collateral.
These  borrowings  bear interest at a rate of prime plus 1.5% to prime plus 5.0%
and  expire  at  various  dates  from  2002  through  2003.  At June  30,  1998,
approximately  $39.5 million is available under these  commitments.  The Company
has a written  commitment  for an additional  $10.0 million of notes  receivable
financing that is subject to final documentation.

         In April 1998, the Company sold,  through a public offering,  1,400,000
shares of its common stock at a price of $6.75;  EVEREN  Securities,  Inc.,  the
underwriter  of the  offering,  also  exercised  its  overallotment  option  and
purchased an additional  200,000 shares at a price of $6.75,  for total proceeds
of $10,800,000.  Proceeds of the offering,  net of the costs of the underwriting
(including  a  7%  underwriting   discount,   professional  fees,  printing  and
promotional costs totaling $1,262,850), were recorded as common stock.

         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.  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 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 12 months.

Other

         In June 1998,  the Company  entered into an agreement to acquire  1,500
one-week, 25-year right-to-use Vacation Ownership Interests to be constructed on
land adjacent to a full service  resort in San Carlos,  Mexico.  Such  interests
will be contributed to Premiere  Vacation Club in exchange for  participation in
the profits of Premiere Vacation Club as provided in the agreement.

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.  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.

Year 2000 Issues

         As with other  organizations,  some of the Company's  computer programs
were originally  designed to recognize  calendar years by their last two digits.
Calculations performed using these truncated fields would not work properly with
dates from the year 2000 and beyond. The Company has initiated efforts to remedy
this  situation and expects all programs to be corrected and tested prior to the
year 2000.  The  incremental  costs of this  project are not  expected to have a
material effect on the Company's consolidated financial statements or results of
operations.
                                       12
<PAGE>
   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
                                   (continued)

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 or six months ended June 30, 1998.
However,  to the extent  inflationary trends affect short-term 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.
                                       13
<PAGE>
                                     Part II

Item I.       Legal Proceedings

              None

Item II.      Changes in Securities and Use of Proceeds

              None

Item III.     Defaults Upon Senior Securities

              None

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

              None

Item V.       Other Information

              None

Item VI.      Exhibits and Reports on Form 8-K

              (i)  Exhibits

                  Exhibit No.         Description
                  -----------         -----------


                       10-1           Secured Line of Credit  Lending  Agreement
                                      between Litchfield  Financial  Corporation
                                      and   ILX   Resorts   Incorporated,    Los
                                      Abrigados Partners Limited Partnership and
                                      Premiere Development Incorporated dated as
                                      of June 12, 1998 (filed herewith)

                      10-2            Secured  Line of  Credit  Promissory  Note
                                      between Litchfield  Financial  Corporation
                                      and   ILX   Resorts   Incorporated,    Los
                                      Abrigados Partners Limited Partnership and
                                      Premiere Development Incorporated dated as
                                      of June 12, 1998 (filed herewith)

                      10-3            Business   Agreement   among  ILX  Resorts
                                      Incorporated,  Premiere  Vacation Club and
                                      Premiere   Development   Incorporated  and
                                      Treasures of the Sea of Cortez,  Promotora
                                      de  Inversion  Turistica,  Immobiliaria  y
                                      Hotelera Los  Algodones  and  Immobiliaria
                                      Cerro  Pelon  dated  as of  June  8,  1998
                                      (filed herewith)

                      27-1            Financial Data Schedule (filed herewith)

             (ii) Reports on Form 8-K

                None
                                       14
<PAGE>
                                   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. Martori
                         --------------------------------
                                Joseph P. Martori
                             Chief Executive Officer




                               /s/ Nancy J. Stone
                         --------------------------------
                                 Nancy J. Stone
                                    President




                              /s/ Stephen W. Morgan
                         --------------------------------
                                Stephen W. Morgan
                             Chief Financial Officer
                            and Senior Vice President


Date:  As of August 10, 1998
                                       15
<PAGE>
                                  EXHIBIT INDEX


No.               Description
---               -----------


10-1              Secured Line of Credit Lending  Agreement  between  Litchfield
                  Financial  Corporation  and  ILX  Resorts  Incorporated,   Los
                  Abrigados   Partners   Limited    Partnership   and   Premiere
                  Development  Incorporated  dated  as of June 12,  1998  (filed
                  herewith)

10-2              Secured  Line of Credit  Promissory  Note  between  Litchfield
                  Financial  Corporation  and  ILX  Resorts  Incorporated,   Los
                  Abrigados   Partners   Limited    Partnership   and   Premiere
                  Development  Incorporated  dated  as of June 12,  1998  (filed
                  herewith)

10-3              Business  Agreement among ILX Resorts  Incorporated,  Premiere
                  Vacation  Club  and  Premiere  Development   Incorporated  and
                  Treasures  of  the  Sea  of  Cortez,  Promotora  de  Inversion
                  Turistica,   Immobiliaria   y  Hotelera  Los   Algodones   and
                  Immobiliaria  Cerro  Pelon  dated  as of June 8,  1998  (filed
                  herewith)

27-1              Financial Data Schedule (filed herewith)

                                       16