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, 1997             Commission File Number 33-16122
                      --------------                                    --------


                                ILX 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.

        Former address: 2777 East Camelback Road, Phoenix, Arizona 85016


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, 1997
-------------------------------                    -----------------------------
Common Stock, without par value                          13,064,290 shares
Preferred Stock, $10 par value                            392,109 shares
                                       1
<PAGE>
                        ILX INCORPORATED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             March 31,            December 31, 
                                                                               1997                    1996
                                                                               ----                    ----
                                                                            (Unaudited)
<S>                                                                      <C>                    <C>             
Assets
     Cash and cash equivalents                                           $      2,039,366       $      3,523,047
     Notes receivable, net                                                     13,001,900             11,745,720
     Resort property held for timeshare sales                                  14,993,944             15,247,587
     Resort property under development                                          1,231,284              1,209,706
     Land held for sale                                                         1,551,065              1,547,493
     Deferred assets                                                              311,462                313,346
     Property and equipment, net                                                4,758,726              4,877,467
     Deferred income taxes                                                      1,144,178              1,178,653
     Other assets                                                               1,877,167              1,631,886
                                                                         ----------------       ----------------
                                                                         $     40,909,092       $     41,274,905
                                                                         ================       ================

Liabilities and Shareholders' Equity
     Accounts payable                                                    $      1,969,721       $      2,310,600
     Accrued and other liabilities                                              3,689,928              3,476,135
     Genesis funds certificates                                                 1,178,423              1,182,087
     Due to affiliates                                                             74,799                139,715
     Notes payable                                                             14,594,726             14,867,096
     Notes payable to affiliates                                                1,449,921              1,567,287
                                                                         ----------------       ----------------
                                                                               22,957,518             23,542,920
                                                                         ----------------       ----------------

Minority Interests                                                              2,630,875              2,556,865
                                                                         ----------------       ----------------

Shareholders' Equity
     Preferred stock, $10 par value; 10,000,000 shares authorized;
       392,109 shares issued and outstanding; liquidation preference of 
       $3,921,090                                                               1,419,243              1,419,243

     Common stock, no par value; 40,000,000 shares authorized;
       13,094,290 and 13,024,290 shares issued and outstanding                  9,828,113              9,788,738

     Treasury stock, at cost, 30,000 shares                                       (36,536)               (36,536)

     Additional paid in capital                                                    78,300                 78,300

     Retained earnings                                                          4,031,579              3,925,375
                                                                         ----------------       ----------------
                                                                               15,320,699             15,175,120
                                                                         ----------------       ----------------
                                                                         $     40,909,092       $     41,274,905
                                                                         ================       ================
</TABLE>
                 See notes to consolidated financial statements
                                       2
<PAGE>
                        ILX INCORPORATED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               Three months ended
                                                                    March 31,
                                                       -------------------------------------
                                                             1997                  1996
                                                             ----                  ----
<S>                                                    <C>                  <C>             
Revenues
     Sales of timeshare interests                      $     5,091,296      $      4,897,089
     Resort operating revenue                                2,427,786             2,317,743
     Sales of land and other                                    31,585                53,261
     Interest income                                           264,723               204,493
                                                       ---------------      ----------------
                                                             7,815,390             7,472,586
                                                       ---------------      ----------------

Cost of sales and operating expenses
     Cost of timeshare interests sold                        1,702,930             1,708,109
     Cost of resort operations                               2,604,113             2,453,162
     Cost of land sold and other                                27,053                27,148
     Advertising and promotion                               1,772,677             1,530,394
     General and administrative                                847,200               675,285
     Provision for doubtful accounts                           146,770               290,180
                                                       ---------------      ----------------
                                                             7,100,743             6,684,278
                                                       ---------------      ----------------

Operating income                                               714,647               788,308

Interest expense                                              (463,585)             (471,094)
                                                       ----------------     -----------------

Income before minority interests and income taxes              251,062               317,214
Minority interests                                             (74,285)             (145,170)
Income taxes                                                   (70,573)              (74,496)
                                                       ----------------     -----------------

Net income                                             $       106,204      $         97,548
                                                       ===============      ================

Net income per common and equivalent share             $          0.01      $           0.01
                                                       ===============      ================

Number of common and equivalent shares                      13,139,290            12,787,700
                                                       ===============      ================
</TABLE>
                 See notes to consolidated financial statements
                                       3
<PAGE>
                        ILX INCORPORATED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                  Three months ended
                                                                                        March 31,
                                                                         ---------------------------------------
                                                                                1997                   1996
                                                                                ----                   ----
<S>                                                                      <C>                    <C>      
Cash flows from operating activities:
     Net income                                                          $        106,204       $         97,548
     Adjustments to reconcile net income to net cash used in operating 
      activities:
     Increase (decrease) in undistributed minority interest                        74,010                (70,736)
     Additions to notes receivable                                             (2,881,898)            (2,770,736)
     Proceeds from sales of notes receivable                                    1,478,948              1,775,022
     Provision for doubtful accounts                                              146,770                290,180
     Depreciation and amortization                                                112,669                215,465
     Deferred income taxes                                                         34,475                173,311
     Amortization of guarantee fees                                                25,350                 18,500
     Change in assets and liabilities:
         Decrease in resort property held for timeshare sales                     253,643                345,395
         Additions to resort property under development                           (21,578)               (10,565)
         Increase in land held for sale                                            (3,572)                (2,309)
         Increase in other assets                                                (251,931)              (180,008)
         Decrease in accounts payable                                            (340,879)              (224,952)
         Increase in accrued and other liabilities                                213,793                289,365
         Decrease in Genesis funds certificates                                    (3,664)               (18,050)
         Decrease in due to affiliates                                            (64,916)              (114,624)
                                                                         -----------------      -----------------
Net cash used in operating activities                                          (1,122,576)              (187,194)
                                                                         -----------------      -----------------

Cash flows from investing activities:
     (Increase) decrease in deferred assets                                       (23,466)                66,999
     Deletions (purchases) of plant and equipment                                  12,722                (56,205)
                                                                         ----------------       -----------------
Net cash (used in) provided by investing activities                               (10,744)                10,794
                                                                         -----------------      ----------------

Cash flows from financing activities:
     Proceeds from notes payable                                                  725,800              1,865,095
     Principal payments on notes payable                                         (998,170)            (1,518,287)
     Principal payments on notes payable to affiliates                           (117,366)              (152,462)
     Distribution to minority partners                                                  -               (400,000)
     Proceeds from issuance of common stock                                        39,375                111,375
     Redemption of preferred stock                                                      -                (12,000)
     Preferred stock dividend payments                                                  -                    (11)
                                                                         ----------------       -----------------
Net cash used in financing activities                                            (350,361)              (106,290)
                                                                         -----------------      -----------------

Net decrease in cash and cash equivalents                                      (1,483,681)              (282,690)

Cash and cash equivalents at beginning of period                                3,523,047              3,746,518
                                                                         ----------------       ----------------
Cash and cash equivalents at end of period                               $      2,039,366       $      3,463,828
                                                                         ================       ================
</TABLE>
                 See notes to consolidated financial statements
                                       4
<PAGE>
                        ILX INCORPORATED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Summary of Significant Accounting Policies

Principles of Consolidation and Business Activities
---------------------------------------------------

The Company's  significant  business activities include  developing,  operating,
marketing  and financing  ownership  interests in resort  properties  located in
Arizona,  Colorado,  Florida, Indiana and Mexico. Effective in the third quarter
of 1994, the Company  expanded its  operations to include  marketing of skin and
hair care products which are not considered significant to resort operations.

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial  information  and the  instructions  to Form  10-Q and  Rule  10-01 of
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, 1997, are not  necessarily  indicative of
the results  that may be expected for the year ending  December  31,  1997.  The
accompanying  financial  statements  should  be read  in  conjunction  with  the
Company's most recent audited financial statements.

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

Revenue Recognition
-------------------

Revenue  from sales of timeshare  interests is  recognized  in  accordance  with
Statement of Financial  Accounting Standard No. 66, Accounting for Sales of Real
Estate ("SFAS No. 66"). No sales are recognized  until such time as a minimum of
10% of the purchase  price has been received in cash,  the buyer is committed to
continued  payments  of the  remaining  purchase  price and the Company has been
released of all future obligations for the timeshare interest.  Resort operating
revenue  represents  daily room rentals and revenues  from food and other resort
services. Such revenues are recorded as the rooms are rented or the services are
performed.

Statements of Cash Flows
------------------------

Cash  equivalents  are highly liquid  investments  with an original  maturity of
three months or less.  During the three month  periods  ended March 31, 1997 and
1996,  the  Company  paid  interest  of  approximately  $497,000  and  $400,000,
respectively,  and  no  income  taxes.  Interest  of  $45,583  and  $17,049  was
capitalized to resort property under development  during the three month periods
ending March 31, 1997 and 1996, respectively.

Reclassifications
-----------------

The  financial  statements  for  prior  periods  have  been  reclassified  to be
consistent with the 1997 financial statement presentation.
                                       5
<PAGE>
Note 2 - Notes Payable

During the first quarter of 1997, the Company borrowed $425,800 against consumer
notes  receivable  and $300,000 on a line of credit that remains  outstanding at
March 31, 1997.


Note 3 - Shareholders' Equity

During the first quarter of 1997, the Company issued 70,000 shares of restricted
common stock, valued at $39,375, to employees in exchange for services provided.

Effective  January 1,  1997,  the  Company  entered  into a one year  consulting
agreement for financial and business advisory services,  subject to extension on
a  month-to-month  basis at the  option  of the  Company.  In  exchange  for the
services to be provided, the Company granted options for up to 500,000 shares of
common stock exercisable over a one year period. Also effective January 1, 1997,
the Company entered into a separate  consulting  agreement through June 1997. In
exchange  for the  services to be  provided  under this  agreement,  the Company
granted  options  for  500,000  shares  of  common  stock  at  $1.25  per  share
exercisable  through June 1997.  The  obligations  to fulfill such options under
both agreements were assumed by an affiliate of the Company effective January 1,
1997.
                                       6
<PAGE>
                                ILX INCORPORATED

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


Results of Operations
---------------------

Sales of timeshare  interests of $5,091,296 in the first quarter of 1997 were 4%
greater  than sales of  $4,897,089  in the first  quarter of 1996.  The increase
reflects greater sales to customers already owning interests in ILX resorts, and
greater  sales from the Sedona Sales Office net of reduced sales from the Kohl's
Ranch and South Bend Sales Offices.

The  increase  in sales to  existing  ILX owners in 1997  reflects  an  expanded
marketing  program  whereby owners are offered the  opportunity to upgrade their
ownership  to a larger size unit,  to exchange  their  ownership  to a different
resort,  and/or  to  purchase  additional  time.  As a result  of the  increased
marketing  efforts to existing  customers,  revenue  increased to  approximately
$776,000 in 1997, from $244,000 in 1996.

Sales of timeshare  interests  from the Sedona  Sales  Office in 1997  increased
approximately $185,000 from the first quarter of 1996 due to increases in prices
and closing  rates  (number of  timeshare  sales  divided by number of timeshare
tours).

Sales of  timeshare  interests in Kohl's Ranch  decreased  from  $738,000 in the
first  quarter of 1996 to $478,000 in the first quarter of 1997 as a result of a
lower closing rate, which was partially offset by increased prices.

Sales of  timeshare  interests  in  Varsity  Clubs of  America - Notre Dame were
$1,404,045  and  $1,259,310  for the three months ended March 31, 1997 and 1996,
respectively.  In 1997,  approximately  $885,000  in Varsity  Clubs of America -
Notre Dame sales were  generated  from the South Bend Sales  Office and $519,000
from the Sedona Sales  Office,  which  commenced  offering  interests in Varsity
Clubs of America - Notre Dame in June 1996.  All 1996 sales of Varsity  Clubs of
America - Notre Dame were made from the South Bend Sales Office. The decrease in
sales from the South Bend Sales Office reflects a greater percentage of sales of
alternate  year usage in 1997 and higher average prices in 1996 as a result of a
discontinued  promotional  program which was in operation  through November 1996
that offered certain purchasers a vacation experience (including airfare and car
rental)  in  addition  to their  timeshare  interval.  The cost of the  vacation
experience was added to the buyer's purchase price.

Cost of timeshare  interests sold as a percentage of sales is comparable between
years.

The  increase in resort  operating  revenue for the three months ended March 31,
1997 from the same period in 1996 reflects increases in occupancy and in average
daily  rates for  Varsity  Clubs of America - Notre  Dame and  Kohl's  Ranch and
revenue from Lomacasi Cottages, which was acquired on March 1, 1996.

Cost of resort  operations  as a  percentage  of  resort  operating  revenue  is
comparable between periods. First quarter cost of resort operations is typically
higher as a percentage of resort  operating  revenue than annual  results due to
the season.

The increase in interest  income from 1996 to 1997 is a result of the  increased
consumer  paper  retained  by the  Company.  The Company  hypothecates  (borrows
against) the majority of its retained paper.
                                       7
<PAGE>
Advertising  and promotion as a percentage  of sales has increased  from 1996 to
1997 due to a lower  closing rate at the Kohl's Ranch Sales Office in 1997,  due
to the increased  costs of  generating  tours to the Sedona and South Bend Sales
Offices in 1997,  and due to the  recognition  in 1996 of benefits from premiums
issued to potential customers in prior periods which expired without redemption.

The increase in general and  administrative  expenses from $675,285 in the first
quarter of 1996 to $847,200 in the first  quarter of 1997 reflects the write-off
of  leasehold  improvements  associated  with the  relocation  of the  Company's
corporate  headquarters in 1997,  stock bonuses issued to employees in 1997, and
in 1996, gains from the discounting and prepayment of accrued obligations.

The  provision  for doubtful  accounts  relates  primarily to sales of timeshare
interests.  The decrease in the  provision  for doubtful  accounts for the first
quarter of 1997 from the same period in 1996  reflects the expected  performance
of the portfolio of consumer paper based on prior years' collection  experience,
both sold and unsold.

Interest expense is comparable between periods and reflects increased borrowings
against consumer paper retained by the Company,  net of reductions in borrowings
against resort property held for sale.

The  decrease in minority  interests  from 1996 to 1997  reflects  the  minority
interest in operating losses of Lomacasi  Cottages,  which was acquired March 1,
1996, the minority interest in operating losses of Sedona Worldwide Incorporated
commencing January 1, 1997, and a decrease in LAP net income in 1997 as a result
of  stock  bonuses   granted  in  1997  and  reductions  in  1996  of  estimated
liabilities.

The decrease in income tax expense as a  percentage  of income from 1996 to 1997
reflects the change in a state tax rate.

Liquidity and Capital Resources
-------------------------------

The Company's  liquidity needs principally arise from the necessity of financing
notes received from sales of timeshare  interests.  In that regard,  the Company
has $5 million of credit issued by a financing  company  under which  conforming
notes from sales of interval interests in Los Abrigados Resort & Spa can be sold
on a recourse  basis through  March 1998.  In addition,  the Company has an open
ended  arrangement with a finance company which is expected to provide financing
of at least $5 million  through  1997.  At March 31,  1997,  approximately  $3.6
million  is  available  under the fixed  commitment  line and a minimum  of $2.7
million is expected to be available on the open-ended line. The Company also has
financing  commitments  whereby the Company may borrow up to $2 million  against
non-conforming  notes from sales of interval interests in Los Abrigados Resort &
Spa,  Golden Eagle  Resort,  Kohl's  Ranch and Varsity  Clubs of America - Notre
Dame, and $2.2 million against conforming notes from sales of interval interests
in Golden  Eagle  Resort  through  March 1998.  Approximately  $2.1  million was
available under these commitments at March 31, 1997.

The Company also has a $10 million financing  commitment whereby the Company may
sell eligible notes received from sales of timeshare  interests in Varsity Clubs
of  America  -  Notre  Dame on a  recourse  basis  through  September  1,  1997.
Approximately $5 million was available under this commitment at March 31, 1997.

The Company has a financing  commitment  whereby it may borrow up to $10 million
against  conforming  notes received from sales of timeshare  interests in Kohl's
Ranch  through  August 1997.  Approximately  $7.7 million was  available on this
commitment at March 31, 1997.
                                       8
<PAGE>
The Company will continue to retain certain  non-conforming notes which have one
to two year terms or which do not otherwise  meet existing  financing  criteria,
and finance these notes either through internal funds or through borrowings from
affiliates  secured  by  the  non-conforming  notes.  The  Company  will  pursue
additional credit facilities to finance conforming and  non-conforming  notes as
the need for such financing arises.

The Company has a $500,000 line of credit each from two financial  institutions.
At March 31, 1997, $700,000 was available for working capital.

In November  1995, the Company  entered into a management  agreement with one of
its  timeshare  lenders  whereby the lender  committed to advance $3.5  million,
provide  strategic  planning and consultation with respect to timeshare sales of
3,500 Los Abrigados  intervals,  and reduce  holdback  requirements on timeshare
paper purchased by the lender.  Although at March 31, 1997,  approximately  $1.1
million remains available under this agreement, an affiliate of the lender filed
for bankruptcy  protection in 1996, and while the Company has been informed that
said  proceedings  do not involve  the lender  with which the  Company  conducts
business,  the lender has failed to fund advances requested by the Company.  The
Company is presently negotiating a settlement with the lender.

Cash used in operating  activities increased from $187,194 in 1996 to $1,122,576
in 1997 due to an  increase  in  consumer  notes  retained  by the  Company,  an
increase in other assets and a decrease in other liabilities.

The change from cash provided by investing activities in 1996 of $10,794 to cash
used in investing activities in 1997 of $10,744 reflects the cancellation of the
Company's  options on its  Varsity  Clubs of  America  sites near Penn State and
Auburn University in 1996.

Cash used in financing activities increased from $106,290 in 1996 to $350,361 in
1997 due to greater borrowings in 1996.

Although no assurances can be made, based on the prior success of the Company in
obtaining  necessary  financings for  operations and for expansion,  the Company
believes  that  with its  existing  financing  commitments,  its cash  flow from
operations and the  contemplated  financings  discussed  above, the Company will
have  adequate  capital  resources  for at least the next twelve to  twenty-four
months.
                                       9
<PAGE>
                                   SIGNATURES





                  Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



                                ILX INCORPORATED
                                  (Registrant)




                              /S/ Joseph P. Martori
                             -----------------------
                                Joseph P. Martori
                             Chief Executive Officer





                               /S/ Nancy J. Stone
                             -----------------------
                                 Nancy J. Stone
                                   President/
                             Chief Financial Officer





                               /S/ Denise L. Janda
                             -----------------------
                                 Denise L. Janda
                            Vice President Controller









Date:  As of May 13, 1997
                                       10