SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For The Quarter Ended March 31, 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 March 31, 1998
-------------------------------                    -----------------------------
Common Stock, without par value                           2,629,473 shares
<PAGE>
                                     PART I

ITEM 1.   FINANCIAL STATEMENTS

                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                          December 31,      March 31,
                                                                             1997             1998
                                                                          ------------    ------------
<S>                                                                       <C>             <C>         
                                     ASSETS
     Cash and cash equivalents                                            $  3,226,038    $  1,963,655
     Notes receivable, net                                                  15,861,621      16,245,912
     Resort property held for Vacation Ownership Interest sales             14,666,658      14,269,699
     Resort property under development                                       2,943,936       4,387,727
     Land held for sale                                                      1,557,498       1,556,998
     Deferred assets                                                           289,009         262,329
     Property and equipment, net                                             3,472,899       3,624,866
     Deferred income taxes                                                     304,430         148,430
     Other assets                                                            1,400,224       1,919,433
                                                                          ------------    ------------

         TOTAL ASSETS                                                     $ 43,722,313    $ 44,379,049
                                                                          ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
     Accounts payable                                                     $  2,830,375    $  1,770,031
     Accrued and other liabilities                                           2,220,566       2,066,185
     Notes payable                                                          19,884,479      21,342,846
     Notes payable to affiliates                                             2,166,100       2,188,848
                                                                          ------------    ------------

         Total liabilities                                                  27,101,520      27,367,910
                                                                          ------------    ------------

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 2,732,533 shares issued                                10,267,667      10,425,188

     Treasury stock, at cost, 103,060 shares                                  (652,587)       (652,587)

     Additional paid in capital                                                 79,450          79,450

     Retained earnings                                                       5,541,372       5,774,197
                                                                          ------------    ------------

         Total shareholders' equity                                         16,620,793      17,011,139
                                                                          ------------    ------------

              TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  $ 43,722,313    $ 44,379,049
                                                                          ============    ============
</TABLE>
                 See notes to consolidated financial statements
                                        2
<PAGE>
                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               Three months ended March 31,
                                                                     1997         1998
                                                                  ----------   ----------
<S>                                                               <C>          <C>       
TIMESHARE REVENUES:
     Sales of Vacation Ownership Interests                        $5,091,296   $5,560,823
     Resort operating revenue                                      2,427,786    2,518,333
     Interest income                                                 264,723      448,007
                                                                  ----------   ----------
         Total timeshare revenues                                  7,783,805    8,527,163
                                                                  ----------   ----------

COST OF SALES AND OPERATING EXPENSES:
     Cost of Vacation Ownership Interests sold                       665,654      791,442
     Cost of resort operations                                     2,544,586    2,615,140
     Sales and marketing                                           2,809,953    3,331,270
     General and administrative                                      794,274      660,372
     Provision for doubtful accounts                                 146,770      162,269
     Depreciation and amortization                                   112,453       86,618
                                                                  ----------   ----------
         Total cost of sales and operating expenses                7,073,690    7,647,111
                                                                  ----------   ----------

Timeshare operating income                                           710,115      880,052

Income from land and other, net                                        4,532       14,288
                                                                  ----------   ----------

Total operating income                                               714,647      894,340

Interest expense                                                     463,585      505,515
                                                                  ----------   ----------

Income before income taxes and minority interests                    251,062      388,825

Income tax expense                                                    70,573      156,000
                                                                  ----------   ----------

Income before minority interests                                     180,489      232,825

Minority interests                                                    74,285         --
                                                                  ----------   ----------

NET INCOME                                                           106,204      232,825
                                                                  ==========   ==========

NET INCOME PER SHARE

     Basic                                                        $     0.03   $     0.08
                                                                  ==========   ==========

     Diluted                                                      $     0.03   $     0.08
                                                                  ==========   ==========
</TABLE>
                 See notes to consolidated financial statements
                                        3
<PAGE>
                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                  Three months ended March 31,
                                                                                       1997           1998
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                                     $   106,204    $   232,825
    Adjustments to reconcile net income to net cash provided by (used in)
       operating activities:
       Undistributed minority interest                                                  74,010           --
       Deferred income taxes                                                            34,475        156,000
       Provision for doubtful accounts                                                 146,770        162,269
       Depreciation and amortization                                                   112,669         86,618
       Amortization of guarantee fees                                                   25,350         24,000
       Change in assets and liabilities:
          Decrease in resort property held for Vacation Ownership Interest sales       253,643        396,959
          Increase in resort property under development                                (21,578)    (1,443,791)
          (Increase) decrease in land held for sale                                     (3,572)           500
          Increase in other assets                                                    (251,931)      (450,359)
          Decrease in accounts payable                                                (340,879)    (1,060,344)
          Increase (decrease) in accrued and other liabilities                         145,213        (30,474)
                                                                                   -----------    -----------

Net cash provided by (used in) operating activities                                    280,374     (1,925,797)
                                                                                   -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Notes receivable, net                                                           (1,402,950)      (546,560)
    Decrease (increase) in deferred assets                                             (23,466)         2,680
    Purchases of plant and equipment, net                                               12,722       (232,435)
                                                                                   -----------    -----------

Net cash used in investing activities                                               (1,413,694)      (776,315)
                                                                                   -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable                                                        725,800      3,053,079
    Principal payments on notes payable                                               (998,170)    (1,594,712)
    Principal payments on notes payable to affiliates                                 (117,366)       (18,638)
    Proceeds from issuance of common stock                                              39,375           --
                                                                                   -----------    -----------

Net cash provided by (used in) financing activities                                   (350,361)     1,439,729
                                                                                   -----------    -----------

DECREASE IN CASH AND CASH EQUIVALENTS                                               (1,483,681)    (1,262,383)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         $ 2,039,366    $ 1,963,655
                                                                                   ===========    ===========
</TABLE>
                 See notes to consolidated financial statements
                                       4
<PAGE>
                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                   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
Registration  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-month  period ended March 31, 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 March 31,
                                     ----------------------------
                                          1997       1998
                                        --------   --------
         Interest paid                  $497,000   $413,000
         Income taxes paid                  --         --
         Capitalized interest             45,000    129,000

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
                                       5
<PAGE>
                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


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.  SFAS 130 was adopted by
the Company in 1998. There were no items of other comprehensive  income, as that
term is defined in SFAS 130, in the three  months  ended March 31, 1997 or March
31, 1998.

Reclassifications

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

Note 2. 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 March 31,
                                                                 ----------------------------
                                                                     1997           1998
                                                                  -----------    -----------
<S>                                                               <C>            <C>        
Net income                                                        $   106,204    $   232,825
Less: Series A preferred stock dividends                              (12,000)       (12,000)
Series C convertible preferred stock cumulation share dividends        (8,642)        (8,323)
                                                                  -----------    -----------
Net income available to common stockholders - basic               $    85,562    $   212,502
                                                                  ===========    ===========
Weighted average shares of common stock outstanding - basic         2,605,858      2,608,086
                                                                  ===========    ===========
Basic net income per share                                        $      0.03    $      0.08
                                                                  ===========    ===========
<CAPTION>
                          Diluted Net Income Per Share
                                                                 Three Months Ended March 31,
                                                                 ----------------------------
                                                                     1997           1998
                                                                  -----------    -----------
<S>                                                               <C>            <C>        
Net income                                                        $   106,204    $   232,825
Less: Series A preferred stock dividends                              (12,000)       (12,000)
                                                                  -----------    -----------
Net income available to common stockholders - diluted             $    94,204    $   220,825
                                                                  ===========    ===========
Weighted average shares of common stock outstanding                 2,605,858      2,608,086
Add: Convertible preferred stock (Series B and C) dilutive effect     114,319        110,541
                                                                  -----------    -----------
Weighted average shares of common stock outstanding - diluted       2,720,177      2,718,627
                                                                  ===========    ===========
Diluted net income per share                                      $      0.03    $      0.08
                                                                  ===========    ===========
</TABLE>

         Stock options and warrants to purchase 67,800 shares of common stock at
prices  ranging  from $7.50 per share to $8.125 per share  were  outstanding  at
March 31, 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 3. 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 4).
                                        6
<PAGE>
                    ILX RESORTS INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 4. Subsequent Event

         In April 1998, the Company sold,  through a public offering,  1,400,000
shares of its common  stock at a price of $6.75 per share.  Additionally  EVEREN
Securities,  Inc., the underwriter of the offering,  exercised its overallotment
option and purchased an additional 200,000 shares at a price of $6.75 per share,
net of an  underwriting  discount of 7%. The proceeds,  net of  commissions  and
other offering expenses,  totaled  approximately $10 million and will be used by
the Company to reduce its indebtedness.
                                       7
<PAGE>
Item II. 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" 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.

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 four  resorts in Arizona,  one in Indiana,  one in
Colorado and the Company is constructing a seventh resort in Tucson, Arizona.

         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.
                                       8
<PAGE>
                     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:
<TABLE>
<CAPTION>
                                                                       Three Months Ended March 31,
                                                                            1997         1998
                                                                            -----        ----- 
<S>                                                                     <C>          <C>      
As a percentage of total timeshare revenues:
     Sales of Vacation Ownership Interests                                   65.4%        65.2%
     Resort operating revenue                                                31.2%        29.5%
     Interest income                                                          3.4%         5.3%
                                                                            -----        ----- 
     Total timeshare revenues                                               100.0%       100.0%
                                                                            =====        ===== 

As a percentage of sales of Vacation Ownership Interests:
     Cost of Vacation Ownership Interests sold                               13.1%        14.2%
     Sales and marketing                                                     55.2%        59.9%
     Provision for doubtful accounts                                          2.9%         2.9%
     Contribution margin percentage from sale of Vacation Ownership
         Interests (1)                                                       28.8%        23.0%

As a percentage of resort operating revenue:
     Cost of resort operations                                              104.8%       103.8%

As a percentage of total timeshare revenues:
     General and administrative                                              10.2%         7.7%
     Depreciation and amortization                                            1.4%         1.0%
     Timeshare operating income                                               9.1%        10.3%

Selected operating data:
     Vacation Ownership Interests sold (2) (3)                                327          376
     Average sales price per Vacation Ownership Interest sold
         (excluding revenues from Upgrades) (2)                         $  12,834    $  12,874
     Average sales price per Vacation Ownership Interest sold
         (including revenues from Upgrades) (2)                         $  15,570    $  14,789
</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)      Consists of an aggregate  of 491 and 572  biennial and annual  Vacation
         Ownership Interests for the three months ended March 31, 1997 and 1998,
         respectively.

Comparison  of the Three  Months  Ended March 31, 1997 to the Three Months Ended
March 31, 1998

         Sales of Vacation  Ownership  Interests  increased  9.2% or $469,527 in
1998 to $5,560,823  from  $5,091,296 in 1997 primarily as a result of 1998 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 increased  15.0% from
327 in 1997 to 376 in 1998  primarily  due to 1998 sales  from the Tucson  sales
office.  Sales of Vacation  Ownership  Interests  in 1998  included 392 biennial
Vacation   Ownership   Interests  (counted  as  196  annual  Vacation  Ownership
Interests) compared to 328 biennial Vacation Ownership Interests (counted as 164
annual Vacation Ownership Interests) in 1997.
                                       9
<PAGE>
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                   (continued)

         Upgrade  revenue,   included  in  Vacation  Ownership  Interest  sales,
decreased 19.5% from $894,426 in 1997 to $720,013 in 1998 because of a change in
trade-in mix. 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 price per Vacation  Ownership  Interest
sold. The average sales price per Vacation  Ownership  Interest sold  (including
Upgrades)  decreased  from  $15,570  in 1997 to  $14,789  in 1998 due to  higher
Upgrade  revenue in 1997 as a result of the trade-in mix,  combined with a lower
number of Vacation Ownership  Interests sold, over which such additional revenue
is allocated.

         Resort operating  revenues and cost of resort operations are comparable
between the two periods.

         The 69.2% increase in interest income from $264,723 in 1997 to $448,007
in 1998 is a result of the increased  Customer Notes retained by the Company and
an increase  in interest  rates  charged by the Company on its  Customer  Notes,
effective July 1997.

         Cost of Vacation  Ownership  Interests sold as a percentage of Vacation
Ownership Interest sales increased from 13.1% in 1997 to 14.2% in 1998 due to an
increase in the  percentage of sales derived from Varsity Clubs of America (VCA)
Vacation  Ownership  Interests,  which  have a  higher  cost of  sales  than the
Company's other resorts.

         Sales and  marketing  as a  percentage  of sales of Vacation  Ownership
Interests  increased to 59.9% in 1998 from 55.2% in 1997 due to increased  costs
in 1998 as a result of the Tucson sales  office,  which has only been open since
August 1997 and which is anticipated to achieve operating efficiency  consistent
with the Company's  standards  following the opening of VCA - Tucson, and due to
the negative  impact on tours to the Sedona and Kohl's Ranch sales  offices from
inclement weather during the first quarter of 1998.

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

         General and administrative expenses decreased 16.9% to $660,372 in 1998
from $794,274 in 1997. General and administrative  expenses decreased to 7.7% as
a  percentage  of total  timeshare  revenues in 1998  compared to 10.2% in 1997.
These   decreases   were  primarily  due  to  the  net  write-off  of  leasehold
improvements   associated  with  the  relocation  of  the  Company's   corporate
headquarters  in the first  quarter  of 1997 and a  reduction  in  property  tax
expense in the first quarter of 1998 related to  successful  appeals of property
tax assessments.

         The 9.0% increase in interest expense from $463,585 in 1997 to $505,515
in 1998 reflects an increase in borrowings against customer notes receivable.

         The  elimination of minority  interests in 1998 is due to the buyout by
the Company of the LAP minority interest in August 1997.

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 1997 and 1998, cash provided by (used
in) operations was $280,374 and  $(1,925,797),  respectively.  The negative cash
flow in 1998 was due primarily to an increase of  $1,443,791 in resort  property
under  development,  which was financed through a construction loan. 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.
                                       10
<PAGE>
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                   (continued)

         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 in 1997
and 1998 was $1,413,694 and $776,315, 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.  The Company is
currently  constructing VCA - Tucson,  Arizona at an aggregate estimated cost of
$7.5 million.  Construction of the facility commenced in 1997 and is expected to
be  completed  in May  1998.  The  Company  has a  commitment  for  construction
financing in the amount of $6.55 million,  which is expected to be sufficient to
build and furnish the property.  At March 31, 1998,  $4.4 million had been drawn
against this commitment.

         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 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  $15.0 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 March 31, 1998,
approximately $3.9 million was available under these commitments.

         The Company also has  financing  commitments  aggregating  $7.1 million
whereby the Company may borrow against notes  receivable  pledged as collateral.
These  borrowings bear interest at a rate of prime plus
                                       11
<PAGE>
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                                   (continued)

3.25% to prime plus 5.0% and expire at various  dates from 1998 through 2000. At
March 31, 1998, approximately $5.0 million is available under these commitments.

         In April 1998, the Company sold,  through a public offering,  1,400,000
share of its  common  stock at a price of $6.75 per share.  Additionally  EVEREN
Securities,  Inc., the underwriter of the offering,  exercised its overallotment
option and purchased an additional 200,000 shares at a price of $6.75 per share,
net of an  underwriting  discount of 7%. The proceeds,  net of  commissions  and
other offering expenses,  totaled  approximately $10 million and will be used by
the Company to reduce its indebtedness.

         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.

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.

Inflation

         Inflation  and  changing  prices have not had a material  impact on the
Company's revenues,  operating income and net income during any of the Company's
three  most  recent  fiscal  years or the three  months  ended  March 31,  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.
                                       12
<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

         On  January  9,  1998,  the  Company  held  a  Special  Meeting  of its
shareholders. At the Special Meeting, the shareholders were asked to vote on the
following proposals:

         (i)      to  effect  a  one-for-five  reverse  split  of the  Company's
                  outstanding Common Stock (the "Reverse Split Proposal"); and

         (ii)     to amend  the  Company's  Articles  of  Incorporation  for the
                  purpose of  changing  its name to "ILX  Resorts  Incorporated"
                  (the "Amendment Proposal").

         The voting results as to such proposals were as follows:
<TABLE>
<CAPTION>
                                                                                                 ABSTENTIONS
                                             VOTES                   VOTES AGAINST                AND BROKER
         PROPOSAL                             FOR                     OR WITHHELD                 NON-VOTES
         --------                             ---                     -----------                 ---------
<S>                                        <C>                          <C>                         <C>   
         Reverse Split                     7,702,459                    116,803                     16,994
         Amendment                         7,824,564                     4,118                      7,574
</TABLE>

Item V.       Other Information

              None

Item VI.      Exhibits and Reports on Form 8-K

              (i)  Exhibits

                   Exhibit No.   Description
                   -----------   -----------
                    
                        4.1      Certificate   of   Amendment   to  Articles  of
                                 Incorporation, filed January 12, 1998 *
                    
                        4.2      Certificate  of  Correction,  filed January 22,
                                 1998,  to correct  Certificate  of Amendment to
                                 Articles of  Incorporation,  filed  January 12,
                                 1998 *

                       27.0      Financial Data Schedule (filed herewith)

             (ii)  Reports on Form 8-K

                   None

*        Incorporated  by  reference  to the copy of this  document  filed as an
         exhibit to the Company's  Registration  Statement on Form S-1 (File No.
         333-45403) 
                                       13
<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 and Interim
                             Chief Financial Officer






Date:  As of May 14, 1998