ILX INC/AZ/, S-1, 1998-02-02

ILX INC/AZ/
S-1, 1998-02-02
REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 1998.

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

ILX RESORTS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
ARIZONA 7011 86-0564171
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

2111 EAST HIGHLAND AVENUE, SUITE 210
PHOENIX, ARIZONA 85016
(602) 957-2777
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

JOSEPH P. MARTORI
CHIEF EXECUTIVE OFFICER
ILX RESORTS INCORPORATED
2111 EAST HIGHLAND AVENUE, SUITE 210
PHOENIX, ARIZONA 85016
(602) 957-2777
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING ZIP CODE, OF
AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
CHRISTOPHER D. JOHNSON, ESQ. PETER T. HEALY, ESQ.
SQUIRE, SANDERS & DEMPSEY L.L.P. O'MELVENY & MYERS LLP
40 NORTH CENTRAL AVENUE 275 BATTERY STREET, SUITE 2600
PHOENIX, ARIZONA 85004 SAN FRANCISCO, CALIFORNIA 94111
(602) 528-4000 (415) 984-8700
</TABLE>

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

APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________

If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [X]
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
============================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (no par value)............. $ $23,000,000 $6,785
- ------------------------------------------------------------------------------------------------------------
Total............................................................................ $6,785
============================================================================================================
</TABLE>

(1) Includes shares of Common Stock that the Underwriters have the option to
purchase to cover over-allotments, if any. See "Underwriting."

(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE, WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS
Subject to completion, dated February 2, 1998
- --------------------------------------------------------------------------------
SHARES

[ILX LOGO]

ILX RESORTS INCORPORATED

Common Stock

ILX Resorts Incorporated, an Arizona corporation (the "Company" or "ILX"),
is a leading developer, marketer and operator of timeshare resorts, also known
as vacation ownership resorts, located primarily in the Western United States.
The Company focuses its growth strategy on marketing vacation ownership
interests in (i) its convenient access resorts and (ii) its proprietary branded
Varsity Clubs of America (defined herein) urban vacation ownership properties.
Following the completion of construction of a Varsity Club property in Tucson,
Arizona, the Company will own seven resorts in three states, Arizona (5
resorts), Colorado (1 resort) and Indiana (1 resort). As of September 30, 1997,
the Company owned an aggregate of 391 units, comprising a total of 20,181 (sold
and unsold) one-week vacation ownership interests, after giving retroactive
effect to the sale of the Lomacasi Resort, the acquisition of Roundhouse Resort
and the construction of 10 units at the Inn at Los Abrigados. See "Prospectus
Summary -- Recent Developments."

All of the shares of no par value common stock (the "Common Stock"),
offered hereby (the "Offering"), are being sold by the Company. ILX's Common
Stock is quoted on the Nasdaq SmallCap Market(SM) under the symbol "ILEX." On
January 28, 1998, the closing bid price of the Common Stock was $5.81 per share.
See "Price Range of Common Stock."

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

SEE "RISK FACTORS" BEGINNING ON PAGE 18 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
===========================================================================================================
UNDERWRITING DISCOUNTS PROCEEDS TO THE
PRICE TO PUBLIC AND COMMISSIONS COMPANY (1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................. $ $ $
- -----------------------------------------------------------------------------------------------------------
Total(2).............................. $ $ $
===========================================================================================================
</TABLE>

(1) Before deducting estimated expenses of $ payable by the Company.
(2) The Company has granted to the several underwriters (the "Underwriters") of
which EVEREN Securities, Inc. is acting as representative (the
"Representative"), an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to additional shares of Common Stock to
cover over-allotments, if any. If the option is exercised in full, the Price
to Public, Underwriting Discounts And Commissions and Proceeds to the
Company will be $ , $ and $ , respectively. See
"Underwriting."

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

The shares of Common Stock are offered subject to receipt and acceptance
by the Representative, to prior sale and to the Representative's right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that delivery of the Common Stock will be made
through The Depository Trust Company, New York, New York, on or about
, 1998.
EVEREN SECURITIES, INC.
The date of this Prospectus is , 1998
<PAGE> 3

[PHOTOS TO COME]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
INCLUDING THE PURCHASE OF THE COMMON STOCK FOLLOWING THE PRICING OF THE OFFERING
TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE PURPOSE OF
MAINTAINING THE PRICE OF THE COMMON STOCK OR THE IMPOSITION OF PENALTY BIDS. SEE
"UNDERWRITING."

Premiere Vacation Club(TM), Varsity Clubs of America(TM), Red Rock
Collection(TM), Sedona Spa(TM), Joey Bistro(TM) and Sedona Worldwide(TM) are
trademarks and trade names of the Company. Certain trademarks and trade names
included in this Prospectus are the property of third parties and the use
thereof does not imply a direct or indirect endorsement of the Company by such
third parties. Specifically, neither the Company nor its subsidiary, Varsity
Clubs of America Incorporated, is affiliated with any university, including
without limitation the University of Notre Dame or the University of Arizona.

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<PAGE> 4

PROSPECTUS SUMMARY

Except as otherwise noted, (A) all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option, (B) all information in
this Prospectus with respect to Vacation Ownership Interests is presented on an
annual, as opposed to an alternate-year basis, (C) all share information has
been adjusted to give retroactive effect to a one-for-five reverse stock split
(the "Reverse Stock Split"), declared effective by the Company as of January 12,
1998 and (D) all information in this Prospectus, except for such information set
forth in this Prospectus under "Summary Consolidated Historical and Pro Forma
Financial Information," "Selected Consolidated Historical and Pro Forma
Financial Information" and the Consolidated Financial Statements, regarding the
Company's inventory of Vacation Ownership Interests at September 30, 1997 gives
retroactive effect to the acquisition of the Roundhouse Resort (59 units and
2,950 Vacation Ownership Interests), the divestment by the Company of its
interest in the Lomacasi Resort and the construction of 10 units at the Inn at
Los Abrigados. See "-- Recent Developments." Unless the context otherwise
requires, references to the "Company" or "ILX" means ILX Resorts Incorporated
and its consolidated subsidiaries. Unless otherwise indicated, all vacation
ownership industry data contained herein is derived from information prepared by
the American Resort Development Association ("ARDA"), an industry trade
association. This Prospectus contains certain "forward-looking statements,"
including statements regarding, among other items, the Company's growth
strategy, industry and demographic trends, the Company's ability to finance its
operations and anticipated trends in its business. Actual results could differ
materially from these forward-looking statements as a result of a number of
factors, including, but not limited to, the Company's need for additional
financing, intense competition in various aspects of its business, the risks of
rapid growth, its dependence on key personnel and other factors described under
"Risk Factors" commencing at page 18 and elsewhere in this Prospectus.

THE COMPANY

ILX is one of the leading developers, marketers and operators of timeshare
resorts in the Western United States. The Company's principal operations consist
of (i) acquiring, developing and operating timeshare resorts, marketed by the
Company as vacation ownership resorts, (ii) marketing and selling vacation
ownership interests in timeshare resorts, which typically have entitled the
buyers thereof to ownership of a fully-furnished unit for a one-week period on
either an annual or an alternate year (i.e. biennial) basis ("Vacation Ownership
Interests"), and (iii) providing purchase money financing to the buyers of
Vacation Ownership Interests at its resorts. In addition, the Company receives
revenue from the rental of its unused or unsold inventory of units at its
vacation ownership resorts, and from the sale of food, beverages and other
services at such resorts. The Company's current portfolio of resorts consists of
four resorts in Arizona, one in Indiana, and one in Colorado, and the Company is
constructing a seventh resort in Tucson, Arizona (collectively, the "ILX
Resorts"). At September 30, 1997, the ILX Resorts (excluding the Tucson property
currently under construction) represented an aggregate of 391 units and 20,181
sold and unsold one-week Vacation Ownership Interests. Upon completion of the
Tucson property currently under construction, the Company expects to own an
aggregate of 453 units, comprising 23,405 (sold and unsold) one-week Vacation
Ownership Interests. As of September 30, 1997, the Company also owned an
aggregate of approximately 81 Vacation Ownership Interests in destination
resorts owned by others and located in Florida, Mexico and elsewhere, and had
acquired the rights to market Vacation Ownership Interests in four destination
resorts owned by an unaffiliated third party and located on the island of Kauai,
Hawaii (collectively, the "Additional Interests").

The Company was founded in 1986 and commenced implementation of its current
operating and growth strategies in the fourth quarter of 1991. During the period
from December 31, 1991 through September 30, 1997, the Company increased the
number of ILX Resorts from two to seven, and increased its total inventory of
sold and unsold Vacation Ownership Interests from 9,915 weeks to 23,486 weeks
(including 3,224 under construction at VCA-Tucson and the 81 Additional
Interests). The Company's total revenues increased from $6.1 million in 1991 to
$32.2 million in 1996, and from $24.3 million for the nine months ended
September 30, 1996 to $26.8 million for the nine months ended September 30,
1997. During this period, the Company's

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<PAGE> 5

growth was fueled principally by the acquisition, redevelopment and expansion of
certain ILX Resorts located in settings of natural beauty and the marketing and
sale of Vacation Ownership Interests in these resorts.

The Company believes it was able to purchase the ILX Resorts and the
Additional Interests at relatively attractive prices because of its skill in
locating, identifying and acquiring distressed or underdeveloped resorts and
Vacation Ownership Interests. The Company successfully utilized this strategy in
connection with its Los Abrigados Resort & Spa in Sedona, Arizona ("Los
Abrigados") (175 units), the Kohl's Ranch Lodge in Payson, Arizona ("Kohl's
Ranch") (52 units) and, most recently, the Roundhouse Resort in
Pinetop/Lakeside, Arizona (59 existing units owned by current owners of Vacation
Ownership Interests and planned expansion of approximately 100 units).

Utilizing management's development expertise, the Company developed and
implemented the Varsity Clubs of America ("Varsity Club") concept. This concept
entails ground-up development of urban vacation ownership properties
strategically situated in tourist destinations which are accessible to major
population centers near prominent colleges and universities. The first Varsity
Club, consisting of 62 units, was completed in August 1995 and is located
approximately three miles from the University of Notre Dame in South Bend,
Indiana ("VCA-South Bend"). Construction of a second Varsity Club, consisting of
62 planned units, located near the University of Arizona in Tucson, Arizona
("VCA-Tucson"), is scheduled for completion in the first quarter of 1998. The
scope of the Company's activities since 1991 have enabled the Company's
management team, which has significant experience in the vacation ownership
resort and real estate development industries, to establish substantial in-house
capabilities in areas critical to the Company's operating and growth strategies,
including property identification and acquisition, property development and
rehabilitation, and Vacation Ownership Interest sales and marketing.

The Company is pursuing a two-pronged operating strategy which focuses on
marketing Vacation Ownership Interests in the Company's convenient access
resorts ("CARs") and in its Varsity Clubs. CARs are typically high-quality
vacation ownership resorts situated in settings of natural beauty and located
within convenient and inexpensive travelling distance from major population
centers (currently Phoenix and Denver). The Company's CARs are intended to
facilitate more frequent "short-stay" getaways, which the Company believes is an
increasingly popular vacation trend. As of September 30, 1997, the Company
operated five CARs consisting of 329 units and held 5,537 unsold Vacation
Ownership Interests in those CARs. The Company's inventory of CARs has been
marketed primarily by ILX employees at the Company's on-site sales offices
located at or near selected ILX Resorts.

Although purchasers will continue to be able to purchase Vacation Ownership
Interests at any individual ILX Resort or an Additional Interest, commencing in
1998, the Company's inventory of CARs will be marketed primarily through
membership interests in its proprietary branded Premiere Vacation Club. The
Premiere Vacation Club offers purchasers a deeded one-week membership interest
which may be used at any time between certain specified dates at any one of the
ILX Resorts included in the Premiere Vacation Club, or may be split into
multiple stays of shorter duration at any combination of such resorts. In
addition, Premiere Vacation Club membership interests may be exchanged for a
stay at other resorts through the major national exchange networks in which
owners of Vacation Ownership Interests in the ILX Resorts and Additional
Interests (the "ILX Owners") may participate, such as Resort Condominiums
International ("RCI") and Interval International ("II"). Substantially all of
the Company's inventory of Vacation Ownership Interests, including those at its
Varsity Clubs and those to be included in the Premiere Vacation Club, qualify as
"red time," the highest demand classification for purposes of participation in
such exchange networks. The Company believes that its Premiere Vacation Club
concept will be appealing to customers because of its emphasis on flexible use
options (e.g., floating days, two-day uses and the ability to split a purchased
membership interest), locations within convenient driving distances from major
metropolitan areas and other features (e.g., high quality amenities and food and
beverage discounts at its participating ILX Resorts).

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<PAGE> 6

States. The Company completed construction and commenced operations of its
prototype Varsity Club property, VCA-South Bend, located near the University of
Notre Dame, in 1995. Construction of a second Varsity Club, VCA-Tucson, located
near the University of Arizona in Tucson, Arizona, is expected to be completed
in the first quarter of 1998. The Company intends to develop its Varsity Club
properties at attractive locations for visiting tourists who may rent
accommodations or purchase a Vacation Ownership Interest from the Company. In
connection with the purchase of a Vacation Ownership Interest, Varsity Clubs
offer area residents an urban "city club" experience with unlimited day-use
privileges, as well as the opportunity to participate in the II Vacation
Ownership Interest exchange network. The Company believes that Varsity Clubs
offer features common to a "city club", including a fitness center, swimming
pool, bar, restaurant/lounge, billiards and large sitting/welcome room. In
addition, the Varsity Clubs concept enables the Company to enlarge the Company's
target list of potential purchasers by utilizing an identification with the
local university to market Vacation Ownership Interests to alumni, sports season
ticket holders, parents of university students and corporate sponsors of
university events, among others, who attend the sporting, academic and cultural
events regularly hosted by various universities, thereby enlarging the Company's
target base of potential purchasers. Varsity Clubs offer a flexible ownership
structure which permits the purchase of Vacation Ownership Interests consisting
of a single day, a collection of single days (such as selected days during an
entire specified sports season) or a traditional one-week period, in addition to
unlimited use of the common areas for "city club" use. The Company believes that
direct marketing to a large target base of potential purchasers with university
affiliations will enable the Company to achieve premium pricing with respect to
those portions of its inventory which coincide with high demand for
accommodations at prominent university-sponsored events. The Company also
believes that its success in gaining access to alumni and other target potential
purchasers with relationships to the University of Notre Dame or the University
of Arizona may facilitate similar arrangements with other universities in the
areas in which future Varsity Clubs are developed.

The Company had over 10,000 existing ILX Owners at September 30, 1997.
During 1996, the Company sold 2,320 annual and biennial Vacation Ownership
Interests at the ILX Resorts, compared to 2,195 and 1,864 during 1995 and 1994,
respectively. During the nine months ended September 30, 1997, the Company sold
1,867 annual and biennial Vacation Ownership Interests at the ILX Resorts,
compared to 1,769 during the nine months ended September 30, 1996. The average
sales price for a Vacation Ownership Interest (excluding sales of Upgrades, as
defined below) was $10,994 for an annual interest and $6,506 for a biennial
interest, resulting in a weighted average price (each biennial interest is
treated as one-half of an annual interest) of $11,963 during the year ended
December 31, 1996 and $11,326 for an annual interest and $6,908 for a biennial
interest, resulting in a weighted average price of $12,602 during the nine
months ended September 30, 1997. At September 30, 1997, the Company had an
existing inventory of 7,437 unsold Vacation Ownership Interests (including
Vacation Ownership Interests in the CARs, VCA-South Bend and the Additional
Interests) and a master plan, subject to consumer demand, receipt of applicable
permits and other contingencies generally applicable to real estate development,
to construct up to 11,438 (including 3,224 to be constructed at VCA-Tucson)
additional Vacation Ownership Interests through 1999 and thereafter at the
existing ILX Resorts. See "Risk Factors -- Risks of Rapid Growth."

Vacation Ownership Industry Trends

The vacation ownership resort industry has experienced rapid growth. In
1994 (the most recent year for which such statistics are generally available),
the worldwide vacation ownership industry grew to approximately $4.8 billion in
sales, compared to $3.2 billion in 1990. Also in 1994, the worldwide industry
grew to 3.1 million owners as compared to 1.8 million owners in 1990. From 1980
through 1994, 4.9 million Vacation Ownership Interests were purchased for total
sales of $36.7 billion.

While demographics differ by property, historically, through 1997, the
average ILX Owner has been between 40 and 55 years old and had an annual income
in excess of $50,000. According to ARDA, in 1997 the median age and household
income of a Vacation Ownership Interest owner in the United States was 50 years
and $71,000, respectively. The Company expects the vacation ownership resort
industry to continue to grow as the "baby-boom" generation moves through the 40
to 55 age bracket. According to the 1990 U.S. Census

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Bureau study, the 40 to 55 age group comprised 17.3% of the U.S. population, and
households with an aggregate income exceeding $40,000 comprised 35.6% of U.S.
households. The number of persons in the United States between the ages of 40
and 55 grew to an estimated 51.4 million in 1995 from 43.1 million in 1990 and
is predicted to increase to approximately 59.5 million by 2000. This represents
estimated growth of 19.3% between 1990 and 1995, and the U.S. Census Bureau
predicted this population group to grow 15.8% from 1995 to 2000. In comparison,
the U.S. Census Bureau reported that the total U.S. population grew and is
projected to grow by less than 6.0% in the same time periods.

The Company believes that a high level of fragmentation in the vacation
ownership resort industry presents opportunities for growth. According to Ragatz
Associates, a long-time vacation ownership industry consultant, there were
approximately 200 operators of approximately 294 vacation ownership resorts
actively selling Vacation Ownership Interests in 1996 in the United States, with
no single operator controlling in excess of 10% of the United States market. See
"Risk Factors -- Competition" "Business -- The Vacation Ownership Industry
Overview" and "Business -- Competition."

Growth Strategy

The Company believes that its experienced management team, substantial
in-house operating and development capabilities and two-pronged marketing
strategy, position the Company to capitalize on the growth trends in the
vacation ownership resort industry. The Company intends to continue to grow by
implementing the following strategies:

Focus on the Western United States. The ILX Resorts are primarily
located in the Western United States, and the Company will continue to
focus its acquisition and development of additional vacation ownership
resorts primarily in that region. The Company believes that the Western
region of the United States provides numerous opportunities to develop or
acquire additional CARs by locating vacation ownership resorts in settings
of natural beauty and, when possible, within convenient travelling
distances of major population centers. The Company also believes the
Western United States has numerous universities located in or near large
population centers which will be targeted as potential sites for future
Varsity Clubs properties. By focusing its expansion in the Western United
States, the Company believes it can more easily incorporate additional
resorts into its Premiere Vacation Club and market these resorts to ILX
Owners and others using its existing sales, marketing and other resources.
Further, demographic trends indicate that the population in the Western
United States will continue to grow at a rate faster than the rest of the
country, providing a larger potential customer base in the future.

Develop Additional Properties. The Company believes its inventory of
Vacation Ownership Interests can be significantly and prudently increased
through the development of additional Varsity Clubs, as well as development
of additional CARs, to be marketed through its Premiere Vacation Club. The
Company successfully completed development of its VCA-South Bend in August
1995, which will serve as the prototype for additional Varsity Clubs.
Construction of the planned 62-unit VCA-Tucson near the University of
Arizona commenced in August 1997 and is expected to be completed in the
first quarter of 1998 at an estimated aggregate cost of $7 million. The
Company intends to develop additional Varsity Clubs using the same general
design concepts, architectural plans and construction specifications which
were established at VCA-South Bend, and which are being implemented in the
development of VCA-Tucson. The Company believes there exist multiple sites
in the Western United States which are accessible to major population
centers and local tourist attractions and are proximate to universities
with prominent athletic and cultural activities so as to make them
appropriate for the development of additional Varsity Clubs. The Company
intends to initiate development of a minimum of five Varsity Clubs in the
next three years. Areas in which the Company is currently investigating the
potential development of additional Varsity Clubs include Tempe, Arizona;
Boulder, Colorado; Las Vegas, Nevada; Palo Alto, California; and Seattle,
Washington. However, no contracts or commitments currently exist for any
such proposed locations. See "Risk Factors -- Risks of Rapid Growth" and
"Risk Factors -- Competition."

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Acquire and Redevelop Additional Resorts. The Company has
historically expanded and enhanced its portfolio of vacation ownership
resorts primarily through the acquisition and redevelopment of CARs located
in settings of natural beauty, which the Company believes have been
available at relatively attractive prices from sellers who have
underutilized or underdeveloped the resorts or are in distressed
situations. By acquiring such resorts at relatively favorable prices and
utilizing the Company's substantial in-house development capabilities to
expand and enhance the resorts' Vacation Ownership Interest inventory, the
Company has been able to achieve favorable overall inventory investment
costs relative to the vacation ownership industry. During 1996, the
Company's average cost of Vacation Ownership Interests sold as a percentage
of Vacation Ownership Interest sales at ILX Resorts was 15.8%, and for
Vacation Ownership Interests which it acquired (as opposed to developed
from ground up) the average cost was 13.7%. Both of the foregoing
percentages compare favorably to the vacation ownership industry's median
product cost as a percentage of net sales of between 20.1% and 25.0%, as
reported in ARDA's Financial Performance Digest 1997.

The Company has previously demonstrated its ability to acquire quality
vacation ownership resorts at relatively attractive prices, and the Company
intends to continue to seek similar opportunities in the future. Because of
management's familiarity with the Company's geographic market and its
skills in the property acquisition and development areas, the Company
believes it will continue to be able to identify a substantial number of
vacation ownership resorts for acquisition which are suitable for the
Company's value-added management approach. Acquired resorts will be
marketed primarily through the Premiere Vacation Club, as individual ILX
Resorts or a combination thereof. The Company believes that its Premiere
Vacation Club will afford greater flexibility in the acquisition of
additional vacation ownership resorts to the extent that small or remote
resorts which may not otherwise be attractive to purchasers of Vacation
Ownership Interests at a single resort may significantly enhance the
consumer appeal of a membership interest in the Premiere Vacation Club. The
Company believes these types of resorts can be acquired at relatively
attractive prices since other potential purchasers are likely to lack the
resources to market such vacation ownership resorts effectively and,
therefore, be unwilling to pay higher prices for them. Although it has no
binding agreements and there can be no assurance that the Company will
consummate any of such acquisitions, the Company is engaged in active
negotiations with respect to several potential vacation ownership resort
acquisitions. See "Risk Factors -- Risks of Rapid Growth."

Expand Existing ILX Resorts. The Company intends to capitalize upon
opportunities to expand the ILX Resorts. The Company believes development
of additional units at existing ILX Resorts is generally the most
economical means of growing the Company's Vacation Ownership Interest
inventory and sales profits because the fixed costs associated with
developing the necessary infrastructure (i.e., lobby areas, restaurant and
pools) need not be incurred and may be spread over a larger number of
units. Currently, the Company's expansion plans during 1998 include the
development of approximately 20 units at Los Abrigados, 24 units at
VCA-South Bend, 12 units at Kohl's Ranch and as many as 40 units at the
Roundhouse Resort. The Company anticipates increasing its inventory of
Vacation Ownership Interests through expansion of existing ILX Resorts by
approximately 8,300 weeks during 1998 (including 3,224 weeks currently
under construction at VCA-Tucson).

Increase Sales of Vacation Ownership Interests to ILX Owners. The
Company seeks to increase sales and profitability at its ILX Resorts and
with respect to the Additional Interests by selling upgrades, which consist
of sales to existing ILX Owners of a Vacation Ownership Interest at a
different ILX Resort or in the Premiere Vacation Club; during a more
popular season or in a larger unit at the same ILX Resort; or of an annual
interest to an owner of a biennial interest (collectively, "Upgrades"). The
Company believes that ILX Owners have a better understanding of Vacation
Ownership Interests than first-time buyers, are generally familiar with the
ILX Resorts and, based on historical experience, have a demonstrated
tendency to take vacations, which results in a higher percentage of sales
from marketing efforts to ILX Owners than to prospective purchasers who
have never purchased a Vacation Ownership Interest. The Company intends to
begin marketing Upgrade sales in its Premiere Vacation Club to ILX Owners
in early 1998. The Company's sales to ILX Owners have increased from $0.7
million of Upgrades

7
<PAGE> 9

in the nine months ended September 30, 1996 to $2.2 million of Upgrades in
the nine months ended September 30, 1997.

Increase Net Income from Customer Financing Transactions. From
January 1, 1994 through September 30, 1997, approximately 20% to 25% of the
Company's sales were on a cash basis and the Company provided financing for
the remaining 75% to 80% of its sales of Vacation Ownership Interests.
Buyers who finance their purchase of Vacation Ownership Interests are
required by the Company to make a down payment of at least 10% of the total
sales price and may pay the balance to the Company over a period of seven
years pursuant to a promissory note wherein the Company is the lender
("Customer Notes"). At September 30, 1997, the Company retained a portfolio
of Customer Notes with an aggregate principal amount of $14.8 million.

Prior to 1995, the Company sold the majority of its Customer Notes and
retained only the small remaining portion, which it used as collateral to
obtain working capital (i.e., hypothecate). Since 1995, the Company has
steadily increased the amount of Customer Notes which it retains and
hypothecates and, as a result, at September 30, 1997, the Company had
retained Customer Notes in an aggregate outstanding principal amount of
$14.8 million as compared to $7.9 million at December 31, 1995. Because the
Company has historically financed its operations through the sale of a
substantial majority of its Customer Notes, the Company's net income from
customer financing transactions (i.e., the spread between the interest
charged to borrowing customers and the Company's borrowing costs) has been
limited. Although there can be no assurance in this regard, the Company
believes that the closing of this Offering and the reduction of its current
indebtedness will allow the Company to arrange more favorable Customer
Notes' financing, which will in turn enable the Company to retain a
significantly greater percentage of its Customer Notes, and, thus, increase
the net income in the event of favorable interest rate differences. See
"Risk Factors -- Financing Customer Borrowings, Liquidity Risks."

The Company believes its relatively high rate of cash sales and low
rate of defaults on Customer Notes is due in part to the relatively high
customer appeal of the ILX Resorts and the credit due diligence
pre-approval process performed by the Company and its lenders. During 1996
and 1997, the Company provided for uncollectible Customer Notes by
reserving 3% of its gross sales (including cash sales) as an allowance for
doubtful accounts. At September 30, 1997, the Company had reserved $3.0
million for possible credit losses. Management believes this amount is
sufficient to cover anticipated losses from defaults on Customer Notes,
however there can be no assurance in this regard. At September 30, 1997,
$3.2 million in principal, or 8.3%, of the retained Customer Notes and
Customer Notes previously sold, which are recourse to the Company, were
more than 90 days past due. See "Risk Factors -- Financing Customer
Borrowings; Liquidity Risks" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Sales and Marketing

All of the Company's sales and substantially all of the Company's marketing
functions are currently performed in-house. Consequently, the Company invests
significant resources attracting, training and seeking to retain its sales and
marketing employees. The Company actively sells Vacation Ownership Interests
through a sales staff of approximately 140 employees, including approximately
100 sales agents at four locations at or near selected the ILX Resorts.
Prospective first-time purchasers participate in a tour of the facilities as
well as its related amenities, guided by a salesperson. At the conclusion of the
tour, the terms of making a purchase, including financing alternatives, are
explained to the customer. In addition to generating sales to first-time buyers,
the Company's sales force seeks to generate sales of additional Vacation
Ownership Interests or Upgrades to ILX Owners. Sales to ILX Owners generally
have lower marketing costs as these buyers tend to be more familiar with the
nature of purchasing a Vacation Ownership Interest and the amenities offered by
the ILX Resorts. Although sales to ILX Owners have historically been a minor
portion of the Company's total sales, the Company intends to increase its sales
efforts with respect to ILX Owners. See "Business -- Growth Strategy."

8
<PAGE> 10

The Company's marketing strategy seeks to target prospective buyers who
respond favorably to travel-related inducements because the Company believes
such consumers are more likely to travel and, therefore, have a greater
likelihood of purchasing a Vacation Ownership Interest. The Company's marketing
activities are devoted primarily towards (i) hotel guests at the ILX Resorts,
(ii) exchange program participants staying at the ILX Resorts, (iii) off-premise
contacts with visitors to the local surroundings of the ILX Resorts and (iv)
direct mail and telemarketing to residents of metropolitan areas within driving
distances of the ILX Resorts. By targeting customers who live within driving
distance of an ILX Resort or who are vacationing at or near an ILX Resort, the
Company avoids the more expensive marketing costs of subsidized air fare and
lodging typically associated with the vacation ownership industry. Consistent
with this strategy, the Company's Varsity Club concept seeks to offer a branded
"city club" experience for flexible use by local residents. In order to enlarge
its base of potential purchasers, the Company's marketing efforts related to its
Varsity Clubs seek to focus upon alumni, parents of university students and
other persons or entities who have a preexisting affiliation with or other
attraction to the local university. All of the Company's marketing activities
emphasize the convenience of its CARs coupled with the opportunity to
participate in exchange networks as well as the quality and breadth of amenities
available at each of the ILX Resorts. See "Business -- Operating Strategies" and
"Business -- Sales and Marketing."

Recent Developments

The Company has recently undertaken certain steps to enhance its operations
and to seek to increase stockholder value, including the following:

Los Abrigados Partnership Buy-In. In August 1997, the Company
acquired the outstanding 21.5% minority interest in Los Abrigados Partners
Limited Partnership ("LAP"), which owns and operates the Los Abrigados
resort. The aggregate consideration paid by the Company in connection with
this acquisition was $2.9 million. The 1996 pre-tax earnings attributable
to the minority interest were $671,664.

Acquisition of Roundhouse Resort. In December 1997, the Company
completed the acquisition of the Roundhouse Resort, an existing 59-unit
vacation ownership resort with approximately five acres of developable land
located in Pinetop/Lakeside, Arizona. The aggregate consideration paid by
the Company in connection with this acquisition was $700,000. Redevelopment
of this property is expected to commence in late 1998 with initial
construction of up to 40 additional units (consisting of an aggregate of
2,080 Vacation Ownership Interests). The Company also plans to market
Upgrades to the approximately 2,500 owners of Vacation Ownership Interests
who acquired the existing 59 units at this resort prior to its acquisition
by the Company. The Company believes that up to a total of 100 additional
units (including the aforementioned 40 units planned to be constructed
during 1998) can be built at this resort, subject to receipt of appropriate
governmental permits.

Sale of Lomacasi. In December 1997, the Company sold its 75% interest
in the Lomacasi Resort in Sedona, Arizona ("Lomacasi") for aggregate
consideration of $2.85 million, including the assumption by the buyer of
indebtedness of $2.23 million and the receipt of 100,000 shares of the
Company's Common Stock, valued at $6.25 per share. Lomacasi had operated at
a loss since its acquisition by the Company in March 1996, and the Company
believes that more attractive expansion opportunities exist at or nearby
the ILX Resorts.

Reverse Stock Split; New Listing. In January 1998, the Company's
shareholders approved the one-for-five Reverse Stock Split of the
outstanding shares of Common Stock, which became effective as of the close
of business on January 12, 1998. Also, in January 1998, the Company
received pre-approval for listing of its Common Stock on the American Stock
Exchange. Although there can be no assurances, the Company intends to have
its Common Stock commence trading on that exchange during the first quarter
of 1998. The Company's Common Stock is currently quoted on the Nasdaq
SmallCap Market. The Company initiated these steps with an objective of
enhancing the long-term value of its Common Stock to its shareholders and
increasing the liquidity of and market for its Common Stock.

9
<PAGE> 11

The Resorts

The table below sets forth certain information, as of September 30, 1997,
with respect to the ILX Resorts and the Additional Interests. The information
set forth below does not include the Company's planned development of additional
Varsity Clubs.
<TABLE>
<CAPTION>
TOTAL VACATION OWNERSHIP
UNITS AT RESORT(1) INTERESTS AT RESORTS(1)
------------------------- -----------------------------------------------
TOTAL UNITS PLANNED TOTAL INTERESTS UNSOLD INTERESTS PLANNED
RESORTS LOCATION AT 9/30/97 EXPANSION(2) AT 9/30/97 AT 9/30/97 EXPANSION(2)
- ---------------- -------------------- ----------- ------------ --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Convenient
Access Resorts
Los Abrigados
Resort & Spa Sedona, AZ 175 20 9,100 2,420 1,040
The Inn at Los
Abrigados(3) Sedona, AZ 10 0 520 520 0
Kohl's Ranch
Lodge Payson, AZ 52 12 2,704 2,027 624
Roundhouse
Resort(4) Pinetop/Lakeside, AZ 59 100 2,950 0 5,200
Golden Eagle Estes Park, CO 33 2 1,683 570 102
--- --- ------ ----- ------
Total CARs 329 134 16,957 5,537 6,966
Varsity Clubs of
America
VCA-South Bend South Bend, IN 62 24 3,224 1,819 1,248
VCA-Tucson(5) Tucson, AZ -- 62 -- 0 3,224
--- --- ------ ----- ------
Total VCAs 62 86 3,224 1,819 4,472
Additional
Interests(6) N/A N/A 81 81 N/A
--- --- ------ ----- ------
Total Vacation
Ownership
Interests(7) 391 220 20,262 7,437 11,438
=== === ====== ===== ======

VACATION OWNERSHIP INTERESTS SOLD(1)
--------------------------------------------------------------
AVERAGE SALES
IN 1997 ONLY PRICE IN 1997
(THROUGH 9/30/97) (THROUGH
9/30/97)
DATE SALES THROUGH ------------------ -----------------
RESORTS COMMENCED 9/30/97 ANNUAL BIENNIAL ANNUAL BIENNIAL
- ---------------- ---------- ------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Convenient
Access Resorts
Los Abrigados
Resort & Spa 1989 6,680 241 400 $13,285 $8,787
The Inn at Los
Abrigados(3) 1998 0 0 0 0 0
Kohl's Ranch
Lodge 1995 677 56 215 $11,808 $6,765
Roundhouse
Resort(4) 1998 2,950 (4) N/A(3) N/A(3) N/A N/A
Golden Eagle 1987 1,113 85 0 $ 9,457 N/A
------ --- -----
Total CARs 11,420 382 615
Varsity Clubs of
America
VCA-South Bend 1995 1,405 185 646 $10,569 $5,888
VCA-Tucson(5) 1998 0 N/A N/A N/A N/A
------ --- -----
Total VCAs 1,405 185 646
Additional
Interests(6) 1987 N/A 39 N/A $ 4,807 N/A
------ --- -----
Total Vacation
Ownership
Interests(7) 12,825 606 1,261
====== === =====
</TABLE>

- ---------------
(1) The Company sells both annual Vacation Ownership Interests (entitling the
owner to the use of a unit for a one-week period on an annual basis) and
biennial Vacation Ownership Interests (entitling the owner to the use of a
unit for a one-week period on an alternate-year basis) with respect to 52
weeks per unit per year. Accordingly, the Company is generally able to sell
52 annual Vacation Ownership Interests or 104 alternate-year Vacation
Ownership Interests per unit. With respect to "Vacation Ownership Interests
Sold" and "Average Sales Price in 1997," the data is provided for both
annual and biennial Vacation Ownership Interests sold. For purposes of
calculating "Total Vacation Ownership Interests at Resorts" and "Vacation
Ownership Interests Sold Through 9/30/97," numbers are based on sales of
Vacation Ownership Interests on an annual basis only and reflect the sale of
50 to 52 weeks per unit per year. To the extent that biennial Vacation
Ownership Interests are sold, the actual number of unsold Vacation Ownership
Interests would be increased.

(2) The completion of planned additional vacation ownership units and Vacation
Ownership Interests is subject to the receipt of applicable governmental
permits, availability of necessary funds, consumer demand and other
contingencies.

(3) Information relating to inventory at this ILX Resort consists of 10 units
(520 weeks) constructed in November 1997.

(4) Information relating to inventory at this ILX Resort includes 59 units
(2,950 weeks) purchased by owners prior to the Company's acquisition of this
ILX Resort in December 1997. The Company's planned expansion at this resort
consists of 40 units during 1998 and the remainder to be constructed in 1999
and thereafter, consistent with demand.

(5) Development of VCA-Tucson is scheduled to be completed in the first quarter
of 1998 and initial marketing of Vacation Ownership Interests at this ILX
Resort is anticipated to commence in April 1998.

(6) The Company owns a designated number of Vacation Ownership Interests in or
has a marketing agreement with respect to the sale of Vacation Ownership
Interests at these resorts.

(7) "Vacation Ownership Interests Sold Through 9/30/97" exclude the Additional
Interests sold.

10
<PAGE> 12

CORPORATE BACKGROUND

The Company was incorporated under the laws of Arizona in 1986 as
"International Leisure Enterprises Incorporated," and thereafter changed its
name to "ILX Incorporated" and in January 1998 to "ILX Resorts Incorporated."
The Company's headquarters are located at 2111 East Highland Avenue, Suite 210,
Phoenix, Arizona 85016. The Company's telephone number is (602) 957-2777.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered
By the Company............................. shares
Common Stock Outstanding
Before the Offering(1)..................... 2,595,023 shares
Common Stock Outstanding
After the Offering(1)...................... shares
Use of Proceeds.............................. The Company intends to use the net proceeds
from this Offering for the repayment of
outstanding indebtedness, construction costs
associated with VCA-Tucson and general working
capital purposes. See "Use of Proceeds."
Nasdaq SmallCap Market Symbol................ ILEX
Dividends.................................... The Company currently intends to retain future
earnings to finance its operations and fund
the growth of its business, and does not
intend to pay cash dividends on its Common
Stock in the foreseeable future. See "Risk
Factors -- Absence of Common Stock Dividends,
Rights of Preferred Stock" and "Dividend
Policy."
</TABLE>

- ---------------
(1) Excludes (i) 60,400 shares of Common Stock issuable upon exercise of
outstanding options with a weighted average exercise price of $8.02, (ii)
131,320 shares of Common Stock issuable upon conversion of outstanding
shares of Preferred Stock, (iii) shares of Common Stock issuable
upon exercise of the Underwriters' over-allotment option in full, (iv)
10,000 shares of Common Stock issuable upon the exercise of outstanding
warrants at an exercise price of $7.50 per share, (v) 20,000 shares of
Common Stock issuable at a weighted average conversion price of $7.50 per
share upon conversion of certain outstanding promissory notes issued by the
Company (the outside conversion date is December 31, 1999) and (vi) 103,060
shares of Common Stock held as treasury shares. See "Management -- Stock
Option Plans," "Description of ILX Securities and Pertinent Arizona
Statutes," "Underwriting" and the Company's Consolidated Financial
Statements.

11
<PAGE> 13

SUMMARY CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL INFORMATION

The Summary Consolidated Historical and Pro Forma Financial Information
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included herein, "Selected Consolidated Historical and Pro Forma
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ----------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (a)
Timeshare revenues:
Sales of Vacation Ownership
Interests.......................... $11,137 $12,264 $18,714 $21,354 $19,639 $15,271 $17,750
Resort operating revenue............. 7,719 8,072 8,764 8,868 11,137 7,997 8,001
Interest income...................... 170 360 403 627 997 712 973
------- ------- ------- ------- ------- ------- -------
19,026 20,696 27,881 30,849 31,773 23,980 26,724
------- ------- ------- ------- ------- ------- -------
Cost of sales and operating expenses:
Cost of Vacation Ownership Interests
sold............................... 2,144 1,457 2,393 3,530 3,101 2,312 2,369
Cost of resort operations............ 6,788 6,962 7,808 9,354 10,596 7,925 7,939
Sales and marketing.................. 5,668 6,718 10,142 10,972 10,678 7,817 10,237
General and administrative........... 1,068 667 1,773 3,410 2,115 1,614 2,003
Provision for doubtful accounts...... 630 1,158 764 1,235 591 459 527
Depreciation and amortization........ 271 353 1,425 696 476 543 345
------- ------- ------- ------- ------- ------- -------
16,569 17,315 24,305 29,197 27,557 20,670 23,420
------- ------- ------- ------- ------- ------- -------
Timeshare operating income............. 2,457 3,381 3,576 1,652 4,216 3,310 3,304
------- ------- ------- ------- ------- ------- -------
Land and other business:
Sales of land and other.............. -- 124 2,472 1,857 377 332 68
Cost of land sold and other.......... -- 114 1,955 1,665 327 291 51
------- ------- ------- ------- ------- ------- -------
Income from land and other business.... -- 10 517 192 50 41 17
------- ------- ------- ------- ------- ------- -------
Total operating income................. 2,457 3,391 4,093 1,844 4,266 3,351 3,321
Interest expense....................... (643) (600) (666) (1,265) (1,975) (1,406) (1,500)
------- ------- ------- ------- ------- ------- -------
Income before income taxes and minority
interests............................ 1,814 2,791 3,427 579 2,291 1,945 1,821
Income tax (expense) benefit........... 100 100 161 547 (679) (608) (657)
------- ------- ------- ------- ------- ------- -------
Income before minority interests....... 1,914 2,891 3,588 1,126 1,612 1,337 1,164
Minority interests..................... (588) (815) (1,440) (501) (561) (486) (178)
------- ------- ------- ------- ------- ------- -------
Net income............................. $ 1,326 $ 2,076 $ 2,148 $ 625 $ 1,051 $ 851 $ 986
======= ======= ======= ======= ======= ======= =======
Net income per common and equivalent
share (b)............................ $ 0.59 $ 0.88 $ 0.86 $ 0.25 $ 0.41 $ 0.33 $ 0.37
======= ======= ======= ======= ======= ======= =======
Number of common and equivalent shares
(b).................................. 2,246 2,358 2,493 2,542 2,590 2,578 2,652
======= ======= ======= ======= ======= ======= =======
</TABLE>

12
<PAGE> 14

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE PRICE
OF VACATION OWNERSHIP INTERESTS SOLD)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(a)
EBITDA(c)................................. $ 2,188 $ 3,062 $ 4,218 $ 2,140 $ 4,253 $ 3,464 $ 3,555
Cash flows provided by (used in):
Operating activities.................... $ 4,296 $ 2,438 $ 4,013 $ (703) $ 3,976 $ 2,530 $ 2,967
Investing activities.................... $(2,493) $(1,433) $(2,149) $(3,156) $(3,520) $(3,300) $(5,811)
Financing activities.................... $(1,449) $ 338 $ (288) $ 3,970 $ (679) $ (341) $ 1,539
Operating data:
Number of ILX Resorts at period end..... 2 2 2 4 4 4 6
Number of Vacation Ownership Interests
sold(d)............................... 913 1,013 1,604 1,877 1,562 1,246 1,236
Number of Vacation Ownership Interests
in inventory at period end(d)......... 6,722 6,250 5,082 9,347 7,955 8,161 7,437
Average price of Vacation Ownership
Interests sold (excluding revenues
from Upgrades)(d)..................... $ 9,778 $10,954 $10,795 $10,624 $11,963 $11,692 $12,602
Average price of Vacation Ownership
Interests sold (including revenues
from Upgrades)(d)..................... $12,198 $12,106 $11,667 $11,377 $12,573 $12,256 $14,361
</TABLE>

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------
DECEMBER 31,
----------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(a):
Notes receivable............................... $ 3,686 $ 6,672 $ 6,751 $ 8,785 $11,746 $15,933
Resort property held for Vacation Ownership
Interest sales............................... 9,798 9,749 9,408 14,852 15,248 14,231
Total assets................................... 15,748 24,907 28,403 37,753 41,275 43,860
Notes payable.................................. 4,865 5,409 7,332 13,528 16,434 22,361
Shareholders' equity........................... 6,478 10,541 12,957 13,775 15,175 16,562
</TABLE>

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

(a) The summary consolidated historical financial information set forth above
for each of the fiscal years 1992 through 1996 and the nine months ended
September 30, 1997, has been derived from the audited consolidated financial
statements of the Company which have been restated to give effect to the
Reverse Stock Split. In the opinion of management of the Company, the data
presented for the nine months ended September 30, 1996, which is derived
from the Company's unaudited consolidated financial statements, reflects all
adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the financial position and results of operation for
such period. Results for the nine months ended September 30, 1997 are not
necessarily indicative of results for the entire fiscal year.

(b) Gives retroactive pro forma effect to the Reverse Stock Split.

13
<PAGE> 15

(c) EBITDA represents net income before interest expense, income taxes and
depreciation and amortization. EBITDA is presented because it is a widely
accepted indicator of a company's financial performance. However, EBITDA
should not be construed as an alternative to net income as a measure of the
Company's operating results or to cash flows from operating activities
(determined in accordance with generally accepted accounting principles) as
a measure of liquidity. Since revenues from Vacation Ownership Interest
sales include Customer Notes received by the Company, EBITDA does not
reflect cash flow available to the Company. The Company's management
interprets trends in EBITDA to be an indicator of the Company's financial
performance, in addition to net income and cash flows from operating
activities (determined in accordance with generally accepted accounting
principles). The following table reconciles EBITDA to net income:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income............. $1,326 $2,076 $2,148 $ 625 $1,051 $ 851 $ 986
Interest expense....... 643 600 666 1,265 1,975 1,406 1,500
Income tax expense
(benefit)............ (100) (100) (161) (547) 679 608 657
Depreciation and
amortization......... 271 353 1,425 696 476 543 345
Amortization of
guarantee fees....... 48 133 140 101 72 56 67
------ ------ ------ ------ ------ ------ ------
EBITDA................. $2,188 $3,062 $4,218 $2,140 $4,253 $3,464 $3,555
====== ====== ====== ====== ====== ====== ======
</TABLE>

(d) Vacation Ownership Interests are expressed in terms of annual intervals
(biennial sales are counted as one-half of an annual sale).

14
<PAGE> 16

SUMMARY PRO FORMA INCOME STATEMENT

<TABLE>
<CAPTION>
PRO FORMA
------------------------------------
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -------------------
1996 1996 1997
------------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Timeshare revenues:
Sales of Vacation Ownership Interests.................... $ 19,639 $15,271 $17,750
Resort operating revenue................................. 10,979 7,893 7,794
Interest income.......................................... 997 712 973
------- ------- -------
31,615 23,876 26,517
------- ------- -------
Cost of sales and operating expenses:
Cost of Vacation Ownership Interests sold................ 3,101 2,312 2,369
Cost of resort operations................................ 10,236 7,674 7,640
Sales and marketing...................................... 10,648 7,813 10,220
General and administrative............................... 2,115 1,614 2,003
Provision for doubtful accounts.......................... 591 459 527
Depreciation and amortization............................ 457 536 311
------- ------- -------
27,148 20,408 23,070
------- ------- -------
Timeshare operating income................................. 4,467 3,468 3,447
------- ------- -------
Land and other business:
Sales of land and other.................................. 377 332 68
Cost of land sold and other.............................. 327 291 51
------- ------- -------
Income from land and other business........................ 50 41 17
------- ------- -------
Total operating income..................................... 4,517 3,509 3,464
Interest expense........................................... (1,945) (1,399) (1,438)
------- ------- -------
Income before income taxes and minority interests.......... 2,572 2,110 2,026
Income tax expense......................................... (1,016) (867) (810)
------- ------- -------
Income before minority interests........................... 1,556 1,243 1,216
Minority interests......................................... -- -- --
------- ------- -------
Net income................................................. $ 1,556 $ 1,243 $ 1,216
======= ======= =======
Net income per common and equivalent share................. $ 0.62 $ 0.50 $ 0.47
======= ======= =======
Number of common and equivalent shares..................... 2,509 2,498 2,572
======= ======= =======
</TABLE>

The above unaudited pro forma income statement data for the nine months
ended September 30, 1996 and 1997 and for the year ended December 31, 1996 gives
effect to (a) the purchase by the Company of the remaining minority interest in
LAP for $2,920,000 consisting of $820,000 cash, 20,000 shares of Common Stock
issued (valued at $125,000) and notes payable aggregating $1,975,000, bearing
interest at 8% per annum and (b) the sale of the Company's general partnership
interest in the Lomacasi Resort for approximately $2,850,000 consisting of the
assumption by the buyer of indebtedness of approximately $2,225,000 and the
receipt by the Company of 100,000 shares of the Company's common stock valued at
$625,000. These transactions are reflected as if they had occurred at the
beginning of the respective periods presented. The adjustments consist of (i)
elimination of the Lomacasi resort operations and related interest expense and
minority interest, (ii) elimination of the LAP minority interest, (iii)
additional interest expense for the debt used to purchase the LAP minority
interest, (iv) reduction in the number of shares outstanding by 80,000,
consisting of the 100,000 shares received from the sale of the Company's general
partnership interest in the Lomacasi Resort less the 20,000 shares issued in
connection with the purchase of the LAP minority

15
<PAGE> 17

interest and (v) adjustment of the provision for income taxes for the effect of
the pro forma adjustments. These adjustments are summarized as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -----------------
1996 1996 1997
------------ ----- -----
INCREASE (DECREASE) IN NET INCOME
(IN THOUSANDS)
<S> <C> <C> <C>
Resort operating revenue.............................. $ (158) $(104) $(207)
Cost of resort operations............................. 360 251 299
Sales and marketing................................... 30 4 17
Depreciation and amortization......................... 19 7 34
Interest expense...................................... 30 7 62
Income tax expense.................................... (337) (259) (153)
Minority interest expense............................. 561 486 178
----- ----- -----
Total................................................. $ 505 $ 392 $ 230
===== ===== =====
</TABLE>

16
<PAGE> 18

SUMMARY PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)

<TABLE>
<S> <C>
Assets:
Cash and cash equivalents........................................................ $ 2,209
Notes receivable, net............................................................ 15,933
Resort property held for Vacation Ownership Interest sales....................... 14,231
Resort property under development................................................ 1,728
Land held for sale............................................................... 1,551
Deferred assets.................................................................. 314
Property and equipment........................................................... 2,985
Deferred income taxes............................................................ 764
Other assets..................................................................... 1,660
-------
$41,375
=======
Liabilities and shareholders' equity:
Accounts payable................................................................. $ 1,920
Accrued liabilities.............................................................. 2,897
Due to affiliates................................................................ 41
Notes payable.................................................................... 17,105
Notes payable to affiliates...................................................... 3,110
-------
25,073
Shareholders' equity............................................................... 16,302
-------
$41,375
=======
</TABLE>

The above unaudited pro forma balance sheet as of September 30, 1997 gives
effect to the sale of the Company's general partnership interest in the Lomacasi
Resort as if it occurred on September 30, 1997. The adjustments to the
historical balance sheet consist of the elimination of the related assets and
liabilities of the Lomacasi general partnership interest and the receipt of
100,000 shares of the Company's Common Stock as consideration for the sale. See
"Prospectus Summary -- Recent Developments." These adjustments are summarized as
follows:

<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents............................................... $ (9)
Property and equipment.................................................. (2,197)
Other assets............................................................ (278)
Accrued liabilities..................................................... (79)
Notes payable........................................................... (2,146)
Shareholders' equity.................................................... (260)
</TABLE>

17
<PAGE> 19

RISK FACTORS

An investment in the Common Stock offered hereby involves a substantial
degree of risk and should only be made by investors who can afford the loss of
their entire investment. Prospective investors, prior to making an investment
decision, should give careful consideration, in addition to the other
information contained in this Prospectus, to the following risk factors. The
following risk factors, however, may not represent all of the risks associated
with the Company's business. The following discussion of certain risks
associated with the Company's business and operations includes certain
forward-looking statements. When used in this Prospectus, the words "estimate,"
"projection," "intends" and "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 any forward-looking statements set
forth below. The Company undertakes no obligation to publicly update or revise
any of the forward-looking statements contained herein.

RISKS OF RAPID GROWTH

Risks Associated with Execution of Growth Strategy. A principal component
of the Company's growth strategy is to acquire additional improved and
unimproved real estate for the construction and development of new Varsity Clubs
and CARs. The Company's ability to execute its growth strategy depends on a
number of factors, including but not limited to: (i) the availability of
attractive resort development opportunities, (ii) the Company's ability to
acquire properties relating to such opportunities on economically feasible
terms, (iii) the Company's ability to market and sell Vacation Ownership
Interests at newly developed or acquired resorts; and (iv) the Company's ability
to manage newly developed or acquired resorts in a manner which results in
customer satisfaction. Specifically, the success of the Company's Premiere
Vacation Club depends upon its ability to acquire and develop a sufficient
number of participating resorts to make membership interests attractive to
consumers. In addition, the success of the Company's Varsity Clubs concept is
dependent on the Company's ability to successfully negotiate with universities
proximate to its Varsity Clubs for access to the alumni, parents and other
persons affiliated with such universities. There can be no assurance that the
Company will be successful with respect to any or all of these factors.

Risks Associated with Financing Growth. The Company intends to selectively
acquire and develop new vacation ownership resorts and continue the expansion of
its ILX Resorts. Acquiring and developing new resorts will place substantial
demands on the Company's liquidity and capital resources, as well as on its
personnel and administrative capabilities. Risks associated with the Company's
development and construction activities include, but are not limited to, the
following: (i) construction costs or delays at a property may exceed original
estimates, possibly making the expansion or development uneconomical or
unprofitable, (ii) sales of Vacation Ownership Interests at a newly completed
resort may not be sufficient to make the resort profitable and (iii) financing
may not be available on terms favorable for development of, or the continued
sales of Vacation Ownership Interests at, a resort. The Company projects that
currently planned expansion at ILX Resorts and development of its planned
VCA-Tucson project will cost in excess of $14 million. Although the Company has
secured adequate financing for those phases of the projects currently under
development, there can be no assurance that adequate additional financing for
future development projects will continue to be available on terms and
conditions favorable to ILX. The Company's ability to obtain and repay any
indebtedness at maturity may depend on refinancing or future sales of debt or
equity, which may not be available on terms favorable to the Company. Factors
which could affect the Company's access to the capital markets, or the cost of
such capital, include changes in interest rates, general economic conditions,
the perception in the capital markets of the vacation ownership industry and the
Company's business, results of operations, leverage, financial condition and
business prospects. The Company does not currently and upon the closing of the
Offering will not have the financing available to complete all of its planned
expansion as set forth in "Business -- Growth Strategy."

While the Company's construction activities typically are performed by
third-party contractors whose performance cannot be assured by the Company,
construction claims may be asserted against the Company for construction defects
and such claims may give rise to liabilities. In addition, certain state and
local laws

18
<PAGE> 20

may impose liability on property developers with respect to construction defects
discovered or repairs made by future owners of such property.

Risks Associated with the Acquisition of Properties. The Company's ability
to execute its growth strategy also depends to a significant degree on the
existence of attractive project acquisition opportunities. Currently, there are
numerous potential buyers of real estate which have a stronger capital structure
than that of the Company and, consequently, such entities have greater resources
with which to acquire attractive resort opportunities. There can be no assurance
that the Company will be able to successfully compete against such other buyers.
In addition, the Company's development and construction activities, as well as
its ownership and management of real estate, are subject to comprehensive
federal, state and local laws regulating matters such as environmental and
health concerns, protection of endangered species, water supplies, zoning, land
development, land use, building design and construction, marketing and sales,
and other matters. Such laws and difficulties in obtaining, or failing to
obtain, the requisite licenses, permits, allocations, authorizations and other
entitlements pursuant to such laws could impact the development and completion
of the Company's projects. See "-- Regulation of Marketing and Sales of Vacation
Ownership Interests and Related Laws." The enactment of "slow growth" or
"no-growth" initiatives or changes in labor or other laws in any area where the
Company's projects are located could also delay, affect the cost or feasibility
of, or preclude entirely the expansion planned at the ILX Resorts or the
development of other resorts. See "Business -- Growth Strategy."

Risks Associated with the Expansion of the ILX Resorts. The Company's
growth strategy includes the expansion of a number of units at the ILX Resorts,
when appropriate. Risks associated with such expansion include but are not
limited to the following: (i) construction costs may exceed original estimates,
possibly making the expansion uneconomical, (ii) construction or conversion may
not be completed as scheduled, possibly resulting in delayed recognition of
revenue and increased interest expense, (iii) applicable governmental permits
and authorizations may not be obtained or may be delayed, (iv) necessary
financing may not be obtained or may be unavailable on favorable terms, and (v)
market demand may not be sufficient to make such expansion profitable.
Accordingly, there can be no assurance that the Company will complete all of its
planned expansion of the ILX Resorts or, if completed, that such expansion will
be profitable.

Risks Associated with Expansion into New Markets. The Company's growth
strategy consists of acquiring and developing additional CARs and Varsity Clubs
throughout the Western United States, including markets in which the Company
does not currently have an ILX Resort or conduct any sales or marketing
activities. Historically, the ILX Resorts have been located primarily in
Arizona, however, the Company's prior success in Arizona or Indiana and Colorado
does not ensure the success of the acquisition, development or operation of
future ILX Resorts or Varsity Clubs. See "-- Geographic Concentration Within the
Western United States, Specifically Arizona." Accordingly, in connection with
expansion into new markets, the Company may be exposed to a number of risks,
including but not limited to (i) a lack of familiarity and understanding of
local consumer preferences, (ii) the inability to attract, hire, train and
retain additional sales, marketing and resort staff at costs attractive to the
Company, (iii) the inability to obtain, or to obtain in a timely manner,
necessary permits and approvals from state and local government agencies and
qualified construction services at acceptable costs, (iv) the inability to
capitalize on new marketing relationships and development agreements, (v) the
uncertainty involved in, and additional costs associated with, marketing
Vacation Ownership Interests prior to completion of marketed units, and (vi)
other uncertainties generally associated with entering new markets.

Dependence on Varsity Clubs of America. The Company's ability to execute
its growth strategy depends to a substantial extent upon the success of its
Varsity Club concept. Although the Company has successfully developed, operated
and marketed VCA-South Bend, there can be no assurance that it will continue to
do so in the future or that it will be successful in developing, operating or
marketing additional Varsity Clubs. The Company's ability to successfully
develop additional Varsity Clubs depends upon the following factors, among
others: (i) the availability of additional locations situated within or
proximate to population centers sufficiently large to provide an appropriate
marketing base, (ii) the availability of suitable land at competitive prices in
attractive locations, (iii) the availability of sufficient capital on
commercially reasonable terms, (iv) the goodwill associated with the Varsity
Clubs of America brand name, (v) the Company's ability to access

19
<PAGE> 21

affinity groups within the markets in which each of its Varsity Clubs operates
or will operate and (vi) the availability of attractive sites proximate to
prominent universities. The Company's failure to effectively manage one or more
of these factors may adversely impact its results of operations.

FINANCING CUSTOMER BORROWINGS; LIQUIDITY RISKS

The Company typically finances 75% to 80% of its overall sales of Vacation
Ownership Interests. Although the Company conducts substantial credit
pre-approval due diligence with respect to each financed sale, there are
significant risks associated with such transactions, including those set forth
below. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and
"Business -- Customer Financing."

Borrower Defaults. Purchasers are required to make a down payment of at
least 10% of the aggregate purchase price of the Vacation Ownership Interest and
deliver a Customer Note to the Company for the balance. Although the Company
conducts credit pre-approval due diligence with respect to each purchaser, it
bears the risk of default associated with Customer Notes which it retains and
those which it sells with recourse. If a buyer of a Vacation Ownership Interest
defaults, the Company will generally pursue collection remedies to the extent
legally permitted. Although the Company, in many cases, may have recourse
against a Vacation Ownership Interest buyer for the unpaid price, certain
states, including Arizona and Indiana, have laws which limit the Company's
ability to recover personal judgments against customers who have defaulted on
their loans. If the Company is unable to collect the defaulted amount or obtain
a voluntary quitclaim to the mortgaged interest, the Company will foreclose on
and then remarket the recovered Vacation Ownership Interest. Irrespective of the
Company's remedy, the associated marketing, selling and administrative costs
from the original sale are not recovered in the event of a default, and such
costs must be incurred again to resell the Vacation Ownership Interest. In
addition, the costs associated with exercising collection and foreclosure
remedies can be high relative to the value of the underlying asset. Further,
private mortgage insurance or its equivalent is not readily available to cover
defaults with respect to Customer Notes.

The Company has historically sold the majority of its Customer Notes to
third parties, most of which are recourse to the Company. As a result, the
Company may be required to repurchase or replace any such Customer Note which
becomes delinquent. The Company takes these contingent obligations into account
in establishing its allowance for uncollectible Customer Notes. There can be no
assurance that such allowances are adequate to offset actual defaults under
Customer Notes which are recourse to the Company. If the Company's allowances
are inadequate to cover actual defaults, the Company's financial condition and
results of operations could be materially adversely affected. See Note 2 of
Notes to Consolidated Financial Statements.

Borrowing Base. The Company typically finances its working capital needs
by hypothecating Customer Notes which meet certain criteria established by
third-party lenders (i.e. conforming Customer Notes), as well as non-conforming
Customer Notes. As of September 30, 1997, the Company had agreements with
lenders to borrow up to $12.0 million against conforming retained Customer Notes
and an additional $2.2 million against non-conforming retained Customer Notes,
of which approximately $8.1 million remained available. Once hypothecated, ILX
Owners make payments on their Customer Notes directly to the lender's collection
center or agent, where receipts are applied against the Company's loan balance.
All of a customer's payments are applied to the Company's loan balance, both
principal and interest. Historically, the Company's borrowings have not
approached the maximum amount available under its existing credit facilities;
however, there can be no assurance that the Company's future working capital
needs will not exceed amounts available under its credit facilities. To the
extent the Company generates additional Customer Notes through its sales
efforts, the applicable Customer Notes may be pledged to lenders for additional
borrowings, subject to applicable restrictions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Negative Cash Flow. On financed sales, the Company ordinarily receives
only 10% of the purchase price on the sale of a Vacation Ownership Interest, but
must pay in full the costs associated with the development, marketing, and sale
of the Vacation Ownership Interest. The foregoing costs generally exceed such
down

20
<PAGE> 22

payment. Maximum borrowings available under the Company's existing credit
facilities may not be sufficient to cover these costs, thereby straining
available capital resources, liquidity and capacity to grow. The Company's
existing credit facilities expire at various dates from 1998 through 2003 and
the Company does not presently have binding agreements to extend the terms of
such credit facilities or for any replacement financing upon the expiration of
such credit facilities. Moreover, there can be no assurance that alternative or
additional credit facilities can be made on terms that are satisfactory to the
Company. Accordingly, future sales of Vacation Ownership Interests may be
limited by both the availability of funds to finance the initial negative cash
flow that often results from sales that are financed by the Company and by
reduced demand which may result if the Company is required to sell its Customer
Notes to lenders. In addition, discounts from the face value of such Customer
Notes may be required by such lenders, if available at all.

Interest Rate Mismatch. The Company has not historically derived
significant net interest income from its financing activities because the
interest receivable on the retained Customer Notes has only slightly exceeded,
if at all, the Company's interest payable. However, in order to increase the net
interest derived from such activities, the Company has recently increased and
intends to further increase the interest rates of Vacation Ownership Interest
purchase money financing and will seek to renegotiate or otherwise obtain lower
rates of interest payable to its lenders. There can be no assurance that the
Company will be able to increase its customer's interest rates without eroding
sales volume or that it will be successful in renegotiating or obtaining lower
interest rates from its lenders. In addition, even if the Company were
successful in these efforts, the Company's indebtedness bears interest at
variable rates while the retained Customer Notes bear interest at fixed rates.
As a result, increases in interest rates could cause the Company's interest
expense to exceed its interest income on its portfolio of retained Customer
Notes. Moreover, the Company does not currently engage in interest rate hedging
transactions. Therefore, any increase in interest rates, particularly if
sustained, could have a material adverse effect on the Company's results of
operations, liquidity and financial position. Further, to the extent interest
rates generally decrease on loans available to the Company's customers, the
Company faces an increased risk that customers will pre-pay their Customer Notes
and reduce the Company's income, if any, from financing activities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Customer Financing."

Maturity Mismatch. The Customer Notes typically have a seven-year term,
while the Company's related revolving credit borrowings mature on different
dates over the next five years. Accordingly, there is a mismatch between the
Company's anticipated cash receipts and cash disbursements. Although the Company
has historically been able to secure financing sufficient to fund its
operations, it does not presently have credit facilities with its lenders to
extend the respective terms of its existing credit facilities or to replace such
credit facilities upon their expiration. Failure to obtain such refinancing or
replacement credit facilities could require the Company to sell its portfolio of
retained Customer Notes, potentially at a discount, or to seek other
alternatives to enable it to continue in business. While the Company has been
successful in obtaining financing to date, there is no assurance it will be able
to do so in the future. The failure to do so in the future could have a material
adverse effect on its results of operations and liquidity. See "-- Acceleration
of Deferred Taxes and Net Operating Loss Carryforward Limitations."

COMPETITION

The vacation ownership industry has historically been highly fragmented
with approximately 200 operators of approximately 294 resorts actively selling
Vacation Ownership Interests in 1996 in the United States, according to Ragatz
Associates, a long time vacation ownership industry research group. These
operators primarily consisted of local and regional resort developers and
operators. See "Business -- The Vacation Ownership Industry Overview." However,
the industry has recently undergone a consolidating trend. In fact, some of the
world's most recognized lodging, hospitality and entertainment companies, such
as Marriott Ownership Resorts, The Walt Disney Company, Hilton Hotels
Corporation, Hyatt Corporation, Four Seasons Hotels & Resorts and Promus Hotel
Corporation, have recently entered the industry. Other companies in the vacation
ownership industry, including Signature Resorts, Inc., Fairfield Communities,
Inc., Silverleaf Resorts, Inc., Trendwest Resorts, Inc. and Vistana, Inc. are
public companies with enhanced access to capital and other resources. As a
result, access to marketing, personnel and other resources may be limited

21
<PAGE> 23

or available to the Company on unfavorable terms. In addition, competition from
vacation ownership resort developers and operators may limit the Company's
ability to acquire additional resorts, and access to affinity groups, while
costs associated with other aspects of the Company's operations are likely to
increase. If the Company is unable to compete successfully against such
companies, its business and results of operations may be materially adversely
affected. See "Business -- Competition."

In addition to the competitors named above, most of the ILX Resorts face
direct competition from smaller, local vacation ownership companies with resorts
within the vicinity of ILX Resorts. The Company is also subject to competition
from other entities engaged in the commercial lodging business, including
condominiums, hotels and motels, and others engaged in the leisure business. ILX
anticipates that it will continue to face substantial competition in all aspects
of its operations from organizations that are more experienced in the leisure
industry and have greater access to financial, marketing and other resources. As
a result, these competitors may have greater negotiating leverage or be able to
take advantage of greater gross sales, thereby reducing the retail price of
Vacation Ownership Interests and causing the Company to achieve relatively
smaller profit margins in order to remain competitive. A reduction in the
product costs associated with any of these competitors, or an increase in the
Company's costs relative to such competitors' costs, could have a material
adverse effect on the Company's results of operations, liquidity and financial
position.

DEPENDENCE ON KEY PERSONNEL

ILX relies upon certain key management employees, including Joseph P.
Martori, Chairman and Chief Executive Officer; Nancy J. Stone, President and
Chief Operating Officer; and Edward S. Zielinski, Executive Vice President of
the Company and President of Varsity Clubs of America Incorporated. ILX
currently has employment agreements with each of these officers, which contain
certain non-competition provisions. See "Management -- Employment Agreements."
However, the loss of any such individuals could materially adversely affect the
Company's business. There can be no assurance that ILX will be able to retain
key members of its current management team or that it will be able to attract
experienced personnel in the future. The Company's success is also dependent
upon its ability to attract and maintain qualified acquisition, development,
marketing, management, administrative and sales personnel. The ability to
attract, train and retain such personnel will become particularly important as
the Company grows and develops additional resorts, and there can be no assurance
that the Company will be successful in attracting and/or retaining such
personnel. Should the Company be unable to attract and retain such key
personnel, the Company's business and results of operations could be materially
adversely affected. See "-- Competition" above and "Management -- Employment
Agreements."

GEOGRAPHIC CONCENTRATION WITHIN THE WESTERN UNITED STATES, SPECIFICALLY ARIZONA

As of September 30, 1997, approximately 60% of the Company's customers and
71% of the ILX Resorts and Additional Interests were located in Arizona. As a
result, the Company's financial condition and results of operations may be
materially adversely affected by local Arizona economic downturns, changing
demographics or regulatory changes. Further, the Company's growth strategy
includes the development and acquisition of additional CARs and Varsity Clubs
throughout the Western United States. Although expansion into markets other than
Arizona may reduce the Company's susceptibility to downturns in the Arizona
market, there can be no assurance that the Company will be able to successfully
apply its current operating strategy to new markets beyond Arizona. In addition,
because the Company intends to execute its growth strategy primarily in the
Western United States, it will continue to be particularly susceptible to
adverse changes in economic circumstances, demographic trends or regulatory
changes affecting those markets which it enters and the Western United States in
general. There can be no assurance that the Company will be able to offset or
minimize the adverse effects of such circumstances upon its business, financial
condition or results of operations. See "-- Risks of Rapid Growth -- Risks
Associated with Expansion into New Markets" above.

DEPENDENCE ON EXCHANGE NETWORKS; LACK OF DIVERSE LOCATIONS

The Company's ability to successfully market and sell Vacation Ownership
Interests is dependent in part upon the availability of exchange networks which
allow ILX Owners to "trade" the time they have purchased

22
<PAGE> 24

for time at another participating vacation ownership resort. All Vacation
Ownership Interests currently offered by ILX are qualified for inclusion in
either the RCI or II exchange network or both. However, there can be no
assurances as to the Company's continued ability to qualify additional
properties or the continued availability of such exchange networks for ILX's
existing portfolio of Vacation Ownership Interests. If such networks cease to
function effectively or ILX is unable to respond to consumer demand for greater
choices of desirable locations, it will be at a competitive disadvantage with
respect to its competitors that can offer such choices. As a result of such
disadvantages, the Company may be unable to sell a sufficient number of Vacation
Ownership Interests or it may be unable to make sales at sufficiently high
prices to remain profitable. As a result of such risks, the Company's results of
operations could be materially adversely affected. See
"Business -- Participation in Exchange Networks."

RISKS ASSOCIATED WITH LEVERAGE

The Company anticipates that its future business activities will be
financed, in whole or in part, with indebtedness obtained pursuant to additional
borrowings under the Company's existing credit facilities or under credit
facilities to be obtained by the Company in the future. The definitive
agreements with respect to these credit facilities do and could contain
restrictive covenants which limit the Company's ability to, among other things,
make capital expenditures, incur additional indebtedness and dispose of assets,
or which require the Company to maintain certain financial ratios. The
indebtedness incurred under these credit facilities may be secured by mortgages
on a portion of the ILX Resorts, Customer Notes and other assets of the Company.
In addition, the Company's present or future credit facilities may not permit
the release of liens on the Company's Vacation Ownership Interests upon the sale
of such interests which could impair their marketability. In the event of a
default by the Company under one or more of these credit facilities, the lenders
could foreclose on the vacation ownership properties secured by a mortgage or
deed of trust or take possession of other assets pledged as collateral.

The extent of the Company's leverage and the terms of the Company's
indebtedness (such as requirements that the Company maintain certain
debt-to-equity ratios) could also impair the Company's ability to obtain
additional financing in the future, to make acquisitions or to take advantage of
significant business opportunities that may arise. Furthermore, the Company's
indebtedness and related debt service obligations may increase its vulnerability
to adverse general economic and vacation ownership industry conditions and to
increased competitive pressures. Although the Company intends to reduce its
indebtedness with a portion of the net proceeds from this Offering, there can be
no assurance that the Company will not be required to incur additional
indebtedness in the foreseeable future to execute its growth strategy. See "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and
"Business -- Growth Strategy."

REGULATION OF MARKETING AND SALES OF VACATION OWNERSHIP INTERESTS AND RELATED
LAWS

The Company's marketing and sales of Vacation Ownership Interests and other
operations are subject to extensive regulation by the federal government and the
states and local jurisdictions in which the Company conducts business. The
Federal Trade Commission has taken the most active federal regulatory role
through the Federal Trade Commission Act, which prohibits unfair or deceptive
acts or competition in interstate commerce. Other federal legislation to which
the Company is or may be subject includes the Truth-in-Lending Act and
Regulation Z, the Equal Opportunity Credit Act and Regulation B, the Interstate
Land Sales Full Disclosure Act, the Real Estate Settlement Procedures Act, the
Consumer Credit Protection Act, the Telephone Consumer Protection Act, the
Telemarketing and Consumer Fraud and Abuse Prevention Act, the Fair Housing Act
and the Civil Rights Acts of 1964, 1968 and 1991. Amendments to any of these
regulations or the enactment of additional regulations could constrain the
manner in which the Company conducts it business and result in reduced revenues
or increased costs.

In addition, many states, including Arizona, have adopted specific laws and
regulations regarding the sale of Vacation Ownership Interests, which require
the Company, among other things, to obtain and file numerous documents and
supporting information with the responsible state agency, and obtain its
approval for an offering statement which describes all material aspects of the
sale of Vacation Ownership Interests. When the

23
<PAGE> 25

agency determines that Vacation Ownership Interests at a particular a project
may be sold, it will issue a public report for the project. Regardless of
whether the resort is located in Arizona, the Company is required to deliver an
offering statement or public report together with certain additional information
concerning the terms of the purchase to all prospective purchasers of a Vacation
Ownership Interest who are Arizona residents and attend a sales presentation in
Arizona. Laws in each state where the Company currently sells Vacation Ownership
Interests generally grant the purchaser of a Vacation Ownership Interest the
right to cancel a contract of purchase at any time within three to seven
calendar days following the date the contract was signed by the purchaser. Most
states also have other laws which regulate the Company's activities and protect
purchasers, such as real estate licensure laws; travel sales licensure laws;
anti-fraud laws; consumer protection laws; telemarketing laws; prize, gift and
sweepstakes laws; and other related laws. ILX and its subsidiary companies are
currently authorized to market and sell interests in all states in which the ILX
Resorts are located and all states in which it is marketing and selling Vacation
Ownership Interests. The Company and its subsidiaries intend to apply for the
right to conduct sales operations in additional states throughout the United
States. However, there can be no assurance that any state will grant, or
continue to grant, ILX the right to sell its Vacation Ownership Interests in
such states or that, if such right to conduct sales operations is granted, it
will be granted on terms and conditions acceptable to ILX. Further, if agents or
employees of ILX violate such regulations or licensing requirements, such acts
or omissions could cause the revocation or non-renewal of licenses required for
the sale of Vacation Ownership Interests in such states.

The Company believes it is in material compliance with applicable federal,
state and local laws and regulations to which it is currently subject relating
to the sale and marketing of Vacation Ownership Interests. However, the Company
expects some consumer complaints in the ordinary course of its business. There
can be no assurance that the costs of resolving such complaints or qualifying
under applicable regulations in all jurisdictions in which the Company desires
to conduct sales will not be significant, that the Company is in material
compliance with applicable federal, state and local laws and regulations, or
that violations of applicable laws will not have adverse implications for the
Company, including, without limitation, negative public relations, potential
litigation and regulatory sanctions. The expense, negative publicity and
potential sanctions associated with the failure to comply with applicable laws
or regulations could have a material adverse effect on the Company's results of
operations, liquidity or financial position. See "Business -- Governmental
Regulation."

Under certain conditions, Vacation Ownership Interests may be considered
"securities" under state or federal law, with consequent time-consuming and
expensive requirements for registration of such interests, licensing of
salespeople and compliance with other regulations. There can be no guarantee
that ILX's Vacation Ownership Interests can be designed so as to avoid
regulation as "securities" under applicable federal or state laws. The Company
has been advised by its counsel, Squire, Sanders & Dempsey L.L.P., that in the
opinion of such counsel, based on its review of the nature of the Company's
Vacation Ownership Interests and its sales practices concerning them, including
its Premiere Vacation Club, the Company's Vacation Ownership Interests do not
constitute "securities" within the meaning of Section 2(1) of the Securities Act
of 1933, as amended. If ILX's Vacation Ownership Interests are deemed to be
securities, there can be no assurance that ILX will be able to comply with the
applicable state and federal securities requirements or that the liabilities or
contingencies that result from such compliance will be immaterial. As a result,
such compliance may impact ILX's ability to conduct its business and may
undermine the value of ILX's securities, including ILX Common Stock.

POSSIBLE ENVIRONMENTAL LIABILITIES

Under various federal, state and local laws, ordinances and regulations, as
well as common law, the owner, operator or tenant of real property is liable for
the costs of removal or remediation of certain hazardous or toxic substances
located on, in, or emanating from, such property, as well as related costs of
investigation and property damage. Such laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of the
hazardous or toxic substances. The presence of such substances, or the failure
to properly remediate such substances, may adversely affect the owner's ability
to sell or lease the property or to borrow money using such real property as
collateral. Other federal and state laws require the

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<PAGE> 26

removal or encapsulation of asbestos-containing material when such material is
in poor condition or in the event of construction, demolition, remodeling or
renovation. Other statutes may require the removal of underground storage tanks.
Noncompliance with these and other environmental, health or safety requirements
and the corresponding requirements to comply with such regulation may result in
the need to cease or alter operations at a property. Further, the owner or
operator of a site may be subject to common law claims by third parties based on
damages and costs resulting from violations of environmental regulations or from
contamination associated with the site.

Although the Company typically conducts extensive due diligence prior to
acquiring real property, it may not obtain Phase I environmental reports with
respect to those properties located in remote or rural areas. Failure to obtain
such reports may result in the Company acquiring or developing unusable property
or assuming certain liabilities which could have been avoided if the Company had
the information typically discovered in a Phase I report. To date, the Company
has obtained environmental reports with respect to three of the ILX Resorts.
Even when such due diligence investigation is performed, no assurance can be
given that the Company's due diligence efforts or Phase I reports, when
available, will reveal all environmental liabilities or that no prior owner
created any material environmental condition not identifiable by the Company.
Certain environmental laws impose liability on a previous owner of property to
the extent hazardous or toxic substances were present during the prior ownership
period. A transfer of the property may not relieve an owner of such liability.
Thus, the Company may have liability with respect to properties previously sold
by it or by its predecessors. See "Business -- Governmental
Regulation -- Environmental Matters."

ACCELERATION OF DEFERRED TAXES AND NET OPERATING LOSS CARRYFORWARD LIMITATIONS

While the Company reports sales of Vacation Ownership Interests as income
for financial reporting purposes upon closing a sale (see Notes to Consolidated
Financial Statements), federal income tax regulations allow the Company to
report a portion of financed sales on the installment method. Under the
installment method, the Company recognizes income on the sale of a Vacation
Ownership Interest when cash is received in the form of a down payment and then
incrementally as payments on retained Customer Notes are received or when the
Customer Note is factored. As of September 30, 1997, the Company had deferred
taxes (i.e., taxes owed to taxing authorities in the future as a consequence of
income previously reported in the financial statements) in the amount of $3.9
million attributable to this method of reporting Vacation Ownership Interests
sales. If the Company should factor the Customer Notes or if the retained
Customer Notes were foreclosed on by a lender of the Company or otherwise
collected or disposed of, the deferred gain would be reportable for tax purposes
and the deferred taxes, including interest on those taxes, as computed under
Section 453 of the Internal Revenue Code of 1986, as amended (the "Code"), would
become due. Moreover, the Company would owe accrued interest on such deferred
taxes which would be payable when the taxes are due in the event the deferred
taxes reverse in a year when income taxes are payable by the Company, the
likelihood of which is not now reasonably ascertainable. There can be no
assurance that the Company will have sufficient cash resources to pay those
taxes and interest if payable. Furthermore, if the Company's sales of Vacation
Ownership Interests should decrease in the future, the Company's diminished
operations may not generate either sufficient tax losses to offset taxable
income or funds to pay the deferred tax liability from prior periods.
Consequently, the Company's liquidity and financial position could be adversely
affected.

At December 31, 1996, the Company, excluding its wholly-owned subsidiary,
Genesis Investment Corp. ("Genesis"), had net operating loss ("NOL")
carryforwards of $3.6 million, which expire in 2001 through 2012. At December
31, 1996, Genesis had federal NOL carryforwards of $2.3 million, which expire in
2008 and state NOL carryforwards of $373,000, which expire in 1998. The Genesis
losses are limited as to usage because they arise from built in losses of an
acquired company and can only be utilized through earnings of Genesis.

25
<PAGE> 27

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. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

LIMITED RESALE MARKET FOR VACATION OWNERSHIP INTERESTS

Based on its experience with the ILX Resorts and the Additional Interests,
the Company believes that resales of Vacation Ownership Interests are generally
made at net sales prices below their original customer purchase price. The
relatively lower sales price is partly attributable to the high marketing and
sales costs associated with initial sales of such Vacation Ownership Interests.
Accordingly, the initial purchase of a Vacation Ownership Interest may be less
attractive to prospective buyers. Also, buyers who seek to resell their Vacation
Ownership Interests may compete with sales of Vacation Ownership Interests by
the Company. While Vacation Ownership Interest resale clearing houses or brokers
do not currently have a material impact on the Company's business, if a
secondary market for Vacation Ownership Interests were to become more organized
and liquid, the availability of resale Vacation Ownership Interests at lower
prices could adversely affect the prices and number of sales of new Vacation
Ownership Interests by the Company. As a result, the Company's business and
results of operations may be adversely affected.

ADVERSE EFFECTS OF DOWNTURNS IN GENERAL ECONOMIC CONDITIONS

Any adverse change in economic conditions or significant price increases or
adverse occurrences affecting the travel and tourism industry, such as the cost
and availability of fuel or real estate, could have a material adverse effect on
the Company's business and results of operations. Such conditions or occurrences
may also have an adverse effect upon the availability and cost of financing for
the Company and its customers, and preclude the Company from making loans to
customers for Vacation Ownership Interest purchases or prevent customers from
paying off outstanding Customer Notes. See "-- Financing Customer Borrowings;
Liquidity Risks -- Borrower Defaults" and "-- Geographic Concentration Within
the Western United States, Specifically Arizona" above.

POSSIBLE VOLATILITY OF STOCK PRICE

The market price of the Common Stock has in the past been, and following
the closing this Offering is likely to be, highly volatile and could be subject
to wide fluctuations in response to quarterly variations in operating results,
announcements of new acquisitions or development projects, changes in financial
estimates by securities analysts or other events or factors (such as the Reverse
Stock Split). The market price of the Common Stock also may be affected by the
Company's ability to meet analysts' expectations, and any failure to meet such
expectations, even if minor, could have a material adverse effect on the market
price of the Common Stock. In addition, the stock market has in the past and may
in the future experience significant and widespread price and volume
fluctuations which have often been unrelated to the operating performance of the
companies whose equity securities may be affected. These broad market
fluctuations may adversely affect the market price of the Common Stock. In the
past, securities class action litigation has often been instituted against a
company following periods of volatility in the market price of its securities.
Even if the Company were to successfully defend itself, any such litigation
instituted against the Company could result in substantial costs and a diversion
of management's attention and resources, which could have a material adverse
effect on the Company's business, results of operations or financial condition.
See "Price Range of Common Stock."

COSTS OF COMPLIANCE WITH LAWS GOVERNING ACCESSIBILITY OF FACILITIES BY DISABLED
PERSONS

A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act, impose requirements related to access and use
by disabled persons of a variety of public accommodations and facilities.
Although the Company believes the ILX Resorts are substantially in compliance
with laws governing their accessibility by disabled persons, the Company may
need to incur additional costs to comply with such laws at its existing or
subsequently acquired resorts. Additional federal, state and local legislation
may impose further burdens or restrictions on the Company, with respect to
access by disabled persons. The

26
<PAGE> 28

ultimate cost of compliance with such legislation is not currently
ascertainable, but such costs could be substantial and, as a result, could have
a material adverse effect on the Company's results of operations, liquidity or
capital resources.

NATURAL DISASTERS; UNINSURED LOSS

There are certain types of losses (such as losses arising from floods or
acts of war) that are not generally insured because they are either uninsurable
or not economically insurable. Should an uninsured loss or a loss in excess of
insured limits occur, the Company could lose its invested capital in a resort,
as well as the anticipated future revenues from such resort. At the same time,
the Company is obligated to pay any debt service or other obligations related to
the property. Consequently, any such loss could have a material adverse effect
on the Company's results of operations, liquidity or financial position. See
"Business -- Insurance."

SEASONALITY AND VARIABILITY OF QUARTERLY RESULTS

The Company has historically experienced quarterly fluctuations in its
gross revenues and net income from its operations. The Company's sales of
Vacation Ownership Interests have typically been lower during the first and
fourth quarters of each year and the Company expects this trend to continue in
the future. In addition, the Company's earnings may be adversely affected by the
timing of the completion of future resorts, fluctuations in travel and vacation
patterns, and weather or other natural phenomena. As the Company enters new
markets, it may experience additional fluctuations in its quarterly results or
an increased impact of seasonality on its business and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

VOTING CONTROL BY EXISTING ILX SHAREHOLDERS

Holders of the Company's Common Stock are entitled to cumulative voting
rights with respect to the election of the Company's directors. Cumulative
voting permits each holder of Common Stock to cast an aggregate number of votes
equal to the number of directorships to be filled multiplied by the number of
shares of Common Stock as to which they are entitled to cast votes. The holders
may cast all of such votes in favor of any individual nominee or may allocate
them among multiple nominees as they choose. As a result, a holder of less than
a majority of the outstanding Common Stock may elect one or more directors by
casting all of his respective votes in favor of a single candidate. Although ILX
currently has 7 directors, ILX's Bylaws authorize a Board of Directors of up to
15 directors. Consequently, a purchaser must hold % of the ILX Common
Stock to be outstanding upon the closing of this Offering to be able to
independently elect a director. Martori Enterprises Incorporated, an Arizona
corporation ("MEI"), controlled by Joseph P. Martori and his cousin, Edward J.
Martori ("EJM"), collectively, will own or have the power to vote approximately
% of the ILX Common Stock outstanding upon the closing of this Offering
( % if the Underwriters' over-allotment option is exercised in full), and
thereby have the power to elect at least of the 7 directors and exert
substantial influence over, and in most cases, control essentially all of ILX's
business and affairs. In addition, Joseph P. Martori and EJM control MEI and its
voting decisions with respect to shares of the Common Stock held by MEI. If the
interests of MEI, Joseph P. Martori and EJM as shareholders differ from the
interests of the other shareholders, such other shareholders may be adversely
affected. See "Certain Relationships and Related Transactions," "Principal
Shareholders" and "Description of ILX Securities and Pertinent Arizona
Statutes."

ARIZONA ANTI-TAKEOVER PROVISIONS; BARRIERS TO TAKEOVER

Arizona law restricts a security holder from entering into certain
transactions, an acquiror from affecting changes in the control of corporations,
and the exercise of certain voting rights without shareholder approval. See
"Description of ILX Securities and Pertinent Arizona Statutes -- Arizona
Anti-Takeover Legislation and Anti-Takeover Devices." Such statutory
restrictions and the availability of Preferred Stock may adversely hamper future
transactions involving a change in control or potential change in control of ILX
or transactions with persons with shareholdings over specified percentages,
thereby depressing the price of ILX Common Stock. Further, such circumstances
may adversely affect the ability of one or more holders of ILX Common

27
<PAGE> 29

Stock to effect a change in control of ILX. See "-- Absence of Common Stock
Dividends; Rights of Preferred Stock" and "-- Dilution".

ABSENCE OF COMMON STOCK DIVIDENDS; RIGHTS OF PREFERRED STOCK

The Company has never paid cash dividends on its Common Stock and it does
not contemplate paying cash dividends on its Common Stock in the foreseeable
future. It is the present intention of ILX's management to retain future
earnings, if any, subject to payment of required dividends on the Company's
outstanding Preferred Stock for reinvestment in the Company. As of September 30,
1997, there were 59,845, 55,000 and 265,623 shares, respectively, of the
Company's Series A, Series B and Series C Preferred Stock outstanding. Each
share of outstanding $10.00 par value Series A Preferred Stock ("Series A
Stock") is entitled to an annual dividend of $.80 per share out of funds legally
available therefor. Dividends may not be paid on ILX Common, Series B or Series
C Preferred Stock until the Series A Stock sinking fund requirements and
dividend payments are satisfied. The $10.00 par value Series C Convertible
Preferred Stock ("Series C Stock") is entitled to receive dividends, when and as
declared by ILX's Board of Directors, out of any funds legally available
therefor at the rate of $.60 per share per annum (the "Dividend Preference")
payable in preference and priority to any payment of any dividend on ILX Common
Stock but subordinate and subject to the dividend rights of the Series A Stock.
Except for "Cumulation Shares" issuable on conversion or liquidation of the
Series C Stock, the right to the Dividend Preference is not cumulative. If,
during any year prior to November 1, 1998, the Dividend Preference is not paid
in full, the unpaid portion thereof will accumulate through November 1, 1998.
See "Dividend Policy" and "Description of ILX Securities and Pertinent Arizona
Statutes."

DILUTION

The Company's Articles of Incorporation, as amended (the "Articles of
Incorporation"), permit the Board of Directors to issue up to an aggregate of
30,000,000 shares of Common Stock and up to 10,000,000 shares of Preferred Stock
in one or more series without any action on the part of its shareholders, the
terms of which may adversely affect the rights of holders of Common Stock. In
addition, the issuance of Preferred Stock may be used as an "anti-takeover"
device without further action on the part of the shareholders. Further, the
issuance of Preferred Stock may dilute the voting power of holders of Common
Stock (such as the issuance of Preferred Stock with super-voting rights) and may
render more difficult the removal of current management, even if such removal
may be in the shareholders' best interests. In addition, any such issuance of
Preferred Stock could prevent the holders of Common Stock from realizing a
premium on their shares. See "Description of ILX Securities and Pertinent
Arizona Statutes."

28
<PAGE> 30

USE OF PROCEEDS

The Company estimates that the net proceeds from the sale of the
shares of Common Stock offered hereby will be approximately
( if the Underwriters' over-allotment option is exercised in full),
after deducting underwriting discounts and commissions and estimated expenses of
this Offering. The Company intends to apply the net proceeds of this Offering as
follows:

<TABLE>
<CAPTION>
APPROXIMATE OFFERING
APPLICATIONS AMOUNT PERCENTAGE
- ----------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Repayment of Existing Debt............................................. $ %
VCA-Tucson Construction Costs.......................................... %
Working Capital........................................................ %
------- -----
Total........................................................ $ 100.0%
======= =====
</TABLE>

The Company intends to use approximately $ million, or %, of the
net proceeds of this Offering to repay outstanding indebtedness of the Company
in the aggregate principal amount of $ million, plus accrued but unpaid
interest thereon (the "Existing Debt"). The Existing Debt matures on various
dates from 1998 through 2003 and accrues interest at rates ranging from 12.0% to
13.5% per annum. The Company intends to use approximately $ million, or
%, of the net proceeds of this Offering to repay indebtedness incurred or
to be incurred after September 30, 1997 and used for the construction of VCA-
Tucson. The debt related to this construction accrues interest at a rate of
12.0% per annum and matures in 2001. Pending such uses, all net proceeds will be
invested in short-term investment grade instruments or bank certificates of
deposit.

PRICE RANGE OF COMMON STOCK

The following table sets forth, for the periods indicated, the range of
high and low sales prices for the Common Stock, as quoted on the Nasdaq SmallCap
Market, after giving effect to the Reverse Stock Split. The closing bid price of
the Company's Common Stock on January 28, 1998 was $5.81, and, as of December
31, 1997, the Common Stock was held by approximately 1,158 holders of record.

<TABLE>
<CAPTION>
COMMON STOCK
---------------
HIGH LOW
----- -----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter.............................................................. $6.90 $5.00
Second Quarter............................................................. 9.70 5.65
Third Quarter.............................................................. 8.15 5.95
Fourth Quarter............................................................. 7.50 4.85
YEAR ENDED DECEMBER 31, 1997
First Quarter.............................................................. $6.88 $5.00
Second Quarter............................................................. 6.88 3.13
Third Quarter.............................................................. 8.44 3.91
Fourth Quarter............................................................. 8.75 5.15
YEAR ENDED DECEMBER 31, 1998
First Quarter (through January 28, 1998)................................... $5.81 $4.38
</TABLE>

29
<PAGE> 31

DIVIDEND POLICY

The Company has not and does not intend in the future to pay cash dividends
on its Common Stock in the foreseeable future. See "Risk Factors -- Absence of
Common Stock Dividends; Rights of Preferred Stock." The Company currently
intends to retain future earnings to finance its operations and fund the growth
of its business. Any payment of future dividends will be at the discretion of
the Board of Directors of the Company and will depend upon, among other things,
the Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual and other restrictions regarding the payment of
dividends, and other factors that the Company's Board of Directors deems
relevant.

As of September 30, 1997, there were 59,845, 55,000 and 265,623 shares,
respectively, of the Company's Series A, Series B and Series C Stock
outstanding. Each share of outstanding Series A Stock is entitled to an annual
dividend of $.80 per share out of funds legally available therefor. Dividends
may not be paid on ILX Common, Series B or Series C Stock until the Series A
Stock dividend requirements are satisfied. The Series C Stock is entitled to a
Dividend Preference, when and as dividends are declared by ILX's Board of
Directors, at the rate of $.60 per share per annum payable prior to any payment
of any dividend on ILX Common Stock but subordinate to the dividend rights of
the Series A Stock. The Series C Stock dividend is not cumulative. If, during
any year prior to November 1, 1998, the Series C Stock dividend is not paid in
full, the unpaid portion will accumulate through November 1, 1998, and the total
accumulated amount will be converted, at the option of the holder, into shares
of Common Stock at a conversion price of $30.00 per share. See "Description of
ILX Securities and Pertinent Arizona Statutes."

30
<PAGE> 32

CAPITALIZATION

The following table sets forth at September 30, 1997, the consolidated
capitalization of the Company on an actual basis and as adjusted to give effect
to the Offering and the application of estimated net proceeds therefrom. This
table should be read in conjunction with "Use of Proceeds," the Consolidated
Financial Statements and the notes thereto, "Selected Consolidated Historical
and Pro Forma Financial Information" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
September 30, 1997
--------------------------
ACTUAL AS ADJUSTED(a)
------- --------------
(dollars in thousands)
<S> <C> <C>
Debt:
Notes payable to affiliates....................................... $ 3,110 $
Notes payable and capital lease obligations....................... 19,251
------- ------
Total indebtedness................................................ 22,361
------- ------
Shareholders' equity:
Preferred Stock, $10 par value; 10,000,000 shares authorized;
380,468 shares issued and outstanding; liquidation preference
of $3,804,680.................................................. 1,385
Common Stock, no par value; 30,000,000 shares authorized;
2,692,433 shares issued and outstanding, and pro forma shares
of as adjusted for the Offering(b)........................ 10,275
Treasury stock, at cost, 6,100 shares............................. (37)
Additional paid-in capital........................................ 79
Retained earnings................................................. 4,860
------- ------
Total shareholders' equity..................................... 16,562
------- ------
Total capitalization...................................... $38,923 $
======= ======
</TABLE>

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

(a) Adjusted to give effect to the application of the estimated net proceeds
from this Offering. See "Use of Proceeds." Assumes repayment of
approximately $ million in principal amount of debt outstanding as of
September 30, 1997, of which $ million is construction debt incurred in
connection with VCA-Tucson since September 30, 1997 and to be incurred prior
to the closing of this Offering. See "Use of Proceeds."

(b) Does not include an aggregate of (i) 60,400 shares of Common Stock reserved
for issuance pursuant to the Company's stock option plans at a weighted
average exercise price of $8.02, (ii) 131,320 shares of Common Stock
reserved for issuance upon conversion of outstanding Preferred Stock, (iii)
10,000 shares of Common Stock reserved for issuance upon exercise of
outstanding warrants at an exercise price of $7.50 per share, (iv) 20,000
shares of Common Stock reserved for issuance upon conversion of a note
payable and (v) shares of Common Stock which the Underwriters may
purchase pursuant to their over-allotment option. See "Management -- Stock
Option Plans," "Description of ILX Securities and Pertinent Arizona
Statutes," "Underwriting" and the Company's Consolidated Financial
Statements.

31
<PAGE> 33

SELECTED CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL INFORMATION

The selected consolidated historical financial information set forth below
for the five years ended December 31, 1996 and for the nine months ended
September 30, 1997 has been derived from the consolidated financial statements
of the Company which have been restated to give effect to the Reverse Stock
Split. The consolidated financial statements of the Company for the three years
in the period ended December 31, 1996 and the nine months in the period ended
September 30, 1997 and as of December 31, 1995 and 1996 and September 30, 1997
were audited by Deloitte & Touche LLP, independent auditors, as indicated in
their report included elsewhere in this Prospectus. In the opinion of management
of the Company, the data presented for the nine months ended September 30, 1996,
which are derived from the Company's unaudited consolidated financial
statements, reflect all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations for such period. Results for the nine months ended
September 30, 1997 are not necessarily indicative of results for the entire
fiscal year.

The Company has recently reformatted and reclassified certain items on its
Consolidated Statements of Operations. This has been done to give readers of the
Company's Consolidated Statements of Operations a clearer view of the financial
performance of the Company's core business: the ownership and operation of
vacation ownership resorts. The Company's "Cost of Vacation Ownership Interests
Sold" line item has been reclassified to consist only of the real estate costs.
The Company had previously included sales commissions and closing costs in this
expense line item. Sales commission expenses and closing costs have been
reclassified as "Sales and Marketing Expenses." Depreciation and amortization
expense has been omitted from general and administrative expense and now
comprises its own expense line item. The Company believes that these
reclassifications are consistent with how many other publicly traded companies
in the vacation ownership industry present their expense line items.

The unaudited pro forma income statement data for the nine months ended
September 30, 1996 and 1997 and for the year ended December 31, 1996 gives
effect only to the minority interest buy-in by the Company in LAP and the sale
of Lomacasi, as if these transactions occurred at the beginning of the
respective periods presented. The unaudited pro forma balance sheet at September
30, 1997 gives effect to the sale of Lomacasi as if it occurred on September 30,
1997. See "Prospectus Summary -- Recent Developments." No contemplated
application of the net proceeds from this Offering are included in the pro forma
income statement and balance sheet data. The unaudited pro forma income
statement and balance sheet data are not necessarily indicative of what the
actual results of operations or financial position of the Company would have
been, nor do they purport to represent the Company's results of operations or
financial position for future periods.

The Selected Consolidated Historical and Pro Forma Financial Information
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included herein, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

32
<PAGE> 34

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ----------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(a)
Timeshare revenues:
Sales of Vacation Ownership
Interests........................ $11,137 $12,264 $18,714 $21,354 $19,639 $15,271 $17,750
Resort operating revenue........... 7,719 8,072 8,764 8,868 11,137 7,997 8,001
Interest income.................... 170 360 403 627 997 712 973
------- ------- ------- ------- ------- ------- -------
19,026 20,696 27,881 30,849 31,773 23,980 26,724
------- ------- ------- ------- ------- ------- -------
Cost of sales and operating expenses:
Cost of Vacation Ownership
Interests sold................... 2,144 1,457 2,393 3,530 3,101 2,312 2,369
Cost of resort operations.......... 6,788 6,962 7,808 9,354 10,596 7,925 7,939
Sales and marketing................ 5,668 6,718 10,142 10,972 10,678 7,817 10,237
General and administrative......... 1,068 667 1,773 3,410 2,115 1,614 2,003
Provision for doubtful accounts.... 630 1,158 764 1,235 591 459 527
Depreciation and amortization...... 271 353 1,425 696 476 543 345
------- ------- ------- ------- ------- ------- -------
16,569 17,315 24,305 29,197 27,557 20,670 23,420
------- ------- ------- ------- ------- ------- -------
Timeshare operating income........... 2,457 3,381 3,576 1,652 4,216 3,310 3,304
------- ------- ------- ------- ------- ------- -------
Land and other business:
Sales of land and other............ -- 124 2,472 1,857 377 332 68
Cost of land sold and other........ -- 114 1,955 1,665 327 291 51
------- ------- ------- ------- ------- ------- -------
Income from land and other
business........................... -- 10 517 192 50 41 17
------- ------- ------- ------- ------- ------- -------
Total operating income............... 2,457 3,391 4,093 1,844 4,266 3,351 3,321
Interest expense..................... (643) (600) (666) (1,265) (1,975) (1,406) (1,500)
------- ------- ------- ------- ------- ------- -------
Income before income taxes and
minority interests................. 1,814 2,791 3,427 579 2,291 1,945 1,821
Income tax (expense) benefit......... 100 100 161 547 (679) (608) (657)
------- ------- ------- ------- ------- ------- -------
Income before minority interests..... 1,914 2,891 3,588 1,126 1,612 1,337 1,164
Minority interests................... (588) (815) (1,440) (501) (561) (486) (178)
------- ------- ------- ------- ------- ------- -------
Net income........................... $ 1,326 $ 2,076 $ 2,148 $ 625 $ 1,051 $ 851 $ 986
======= ======= ======= ======= ======= ======= =======
Net income per common and equivalent
share(b)........................... $ 0.59 $ 0.88 $ 0.86 $ 0.25 $ 0.41 $ 0.33 $ 0.37
======= ======= ======= ======= ======= ======= =======
Number of common and equivalent
shares(b).......................... 2,246 2,358 2,493 2,542 2,590 2,578 2,652
======= ======= ======= ======= ======= ======= =======
</TABLE>

33
<PAGE> 35

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------
DECEMBER 31,
----------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(a)
Notes receivable............................... $ 3,686 $ 6,672 $ 6,751 $ 8,785 $11,746 $15,933
Resort property held for Vacation Ownership
Interest sales............................... 9,798 9,749 9,408 14,852 15,248 14,231
Total assets................................... 15,748 24,907 28,403 37,753 41,275 43,860
Notes payable.................................. 4,865 5,409 7,332 13,528 16,434 22,361
Shareholders' equity........................... 6,478 10,541 12,957 13,775 15,175 16,562
</TABLE>

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

(a) The selected consolidated historical financial information set forth above
for each of the fiscal years 1992 through 1996 and the nine months ended
September 30, 1997, has been derived from the audited consolidated financial
statements of the Company which have been restated to give effect to the
Reverse Stock Split. In the opinion of management of the Company, the data
presented for the nine months ended September 30, 1996, which is derived
from the Company's unaudited consolidated financial statements, reflects all
adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the financial position and results of operation for
such period. Results for the nine months ended September 30, 1997 are not
necessarily indicative of results for the entire fiscal year.

(b) Gives retroactive pro forma effect to the Reverse Stock Split.

34
<PAGE> 36

operating activities (determined in accordance with generally accepted
accounting principles). The following table reconciles EBITDA to net income:

- ---------------
(d) Vacation Ownership Interests are expressed in terms of annual intervals
(biennial sales are counted as one-half of an annual sale).

35
<PAGE> 37

PRO FORMA INCOME STATEMENT

36
<PAGE> 38

interest and (v) adjustment of the provision for income taxes for the effect of
the pro forma adjustments. These adjustments are summarized as follows:

37
<PAGE> 39

PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)

38
<PAGE> 40

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
Prospectus, the words "estimate," "projection," "intend" and "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
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 rental of its unused or unsold inventory of units at its vacation ownership
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 revenues 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 recission 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
Interests. 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.

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<PAGE> 41

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
As a percentage of total timeshare
revenues:
Sales of Vacation Ownership
Interests........................... 67.1% 69.2% 61.8% 63.7% 66.4%
Resort operating revenue............... 31.4% 28.8% 35.1% 33.3% 30.0%
Interest income........................ 1.5% 2.0% 3.1% 3.0% 3.6%
------- ------- ------- ------- -------
Total timeshare revenues............ 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= =======
As a percentage of sales of Vacation
Ownership Interests:
Cost of Vacation Ownership Interests
sold................................ 12.8% 16.5% 15.8% 15.1% 13.3%
Sales and marketing.................... 54.2% 51.4% 54.4% 51.2% 57.7%
Provision for doubtful accounts........ 4.1% 5.8% 3.0% 3.0% 3.0%
Contribution margin percentage from
sale of Vacation Ownership
Interests(1)........................ 28.9% 26.3% 26.8% 30.7% 26.0%
As a percentage of resort operating
revenue:
Cost of resort operations.............. 89.1% 105.5% 95.1% 99.1% 99.2%
As a percentage of total timeshare
revenues:
General and administrative............. 6.4% 11.1% 6.7% 6.7% 7.5%
Depreciation and amortization.......... 5.1% 2.3% 1.5% 2.3% 1.3%
Timeshare operating income............. 12.8% 5.4% 13.3% 13.8% 12.4%
Selected operating data:
Vacation Ownership Interests sold
(2)(3).............................. 1,604 1,877 1,562 1,246 1,236
Averages sales price per Vacation
Ownership Interest sold (excluding
revenues from Upgrades)(2).......... $10,795 $10,624 $11,963 $11,692 $12,602
Average sales price per Vacation
Ownership Interest sold (including
revenues from Upgrades)(2).......... $11,667 $11,377 $12,573 $12,256 $14,361
</TABLE>

- ---------------
(1) Defined as: the sum of Vacation Ownership Interest sales less the cost of
Vacation Ownership Interests sold less the cost of sales and marketing 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 1,864; 2,195; 2,320; 1,769 and 1,867 biennial
and annual Vacation Ownership Interests for the years ended December 31,
1994, 1995 and 1996 and the nine months ended September 30, 1996 and 1997,
respectively.

Comparison of Nine Months Ended September 30, 1996 to Nine Months Ended
September 30, 1997

Sales of Vacation Ownership Interests increased 16.3% or $2.5 million for
the nine months ended September 30, 1997 to $17.8 million from $15.3 million for
the nine months ended September 30, 1996. The increase reflects both an increase
in sales prices and an expanded marketing program whereby existing ILX Owners
are offered an opportunity to purchase an Upgrade. Upgrade revenue, included in
sales of Vacation Ownership Interests, increased 214.3% from $0.7 million in
1996 to $2.2 million in 1997. The average sales price per Vacation Ownership
Interest sold (including Upgrades) increased 17.2% from $12,256 in 1996 to
$14,361 in 1997 as a result of increased sales prices and the additional Upgrade
sales. 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.

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<PAGE> 42

The number of Vacation Ownership Interests sold decreased 0.8% from 1,246
in 1996 to 1,236 in 1997. The average sales price per Vacation Ownership
Interest sold (excluding Upgrades) increased 7.8% from $11,692 in 1996 to
$12,602 in 1997. Sales of Vacation Ownership Interests in 1997 included 1,261
biennial Vacation Ownership Interests (counted as 631 annual Vacation Ownership
Interests) compared to 1,151 biennial Vacation Ownership Interest sales (counted
as 576 annual Vacation Ownership Interests) in 1996. The increase in average
price per Vacation Ownership Interest sold (excluding Upgrades) in 1997 resulted
both from increased prices and from the Company's increased sales of biennial
Vacation Ownership Interests (the sales price of which is more than one-half of
an annual Vacation Ownership Interest sales price).

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

The 36.6% increase in interest income from $712,628 in 1996 to $973,236 in
1997 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 decreased from 15.1% in 1996 to 13.3% in 1997 due to
the increased sales of biennial Vacation Ownership Interests (which have a lower
cost of sales percentage than annual Vacation Ownership Interests) and also due
to a larger amount of Upgrade sales in 1997.

Sales and marketing as a percentage of sales of Vacation Ownership
Interests increased to 57.7% in 1997 compared to 51.2% in 1996 due to (i)
increased costs of generating tours to ILX Resorts in 1997, (ii) increased costs
from the opening of a new sales office in Phoenix in 1997, (iii) opening of a
Tucson sales office in 1997 (which is anticipated to achieve operating
efficiency consistent with the Company's standards following opening of
VCA-Tucson), and (iv) recognition in 1996 of benefits from premiums issued to
potential customers in prior periods which expired without redemption. Increases
in costs of generating tours in 1997 is due in part to the trial of several new
marketing strategies which were determined ineffective and were therefore
terminated in July and August 1997. Additionally, the Phoenix sales office was
not retained beyond the trial period (April - July 1997) due to high marketing
costs and low closing rates.

The provision for doubtful accounts as a percentage of Vacation Ownership
Interest sales remained constant at 3.0%.

General and administrative expenses increased 25.0% to $2.0 million in 1997
from $1.6 million in 1996. General and administrative increased to 7.5% as a
percentage of total timeshare revenues in 1997 from 6.7% in 1996 due to an
increase in payroll expense, professional fees and rent expense.

The decrease in minority interests from 1996 to 1997 reflects (i) the
buyout by the Company of the LAP minority interest in August 1997 and (ii)
reduced LAP resort income and stock bonuses granted in 1997.

Comparison of Year Ended December 31, 1995 to the Year Ended December 31, 1996

Sales of Vacation Ownership Interests decreased by 8.4% or $1.8 million to
$19.6 million in 1996 from $21.4 million in 1995. Part of this decline reflects
operation through April 1995 of a Phoenix sales office (which generated
approximately $771,000 in sales in 1995 prior to closure) and the recognition of
approximately $513,000 in sales of Vacation Ownership Interests in VCA-South
Bend written in 1994 but for which revenue recognition was deferred until
completion of construction in 1995. Upgrade revenue, included in Vacation
Ownership Interest sales, decreased 28.6% from $1.4 million in 1995 to $1.0
million in 1996. The average sales price per Vacation Ownership Interest sold
(including Upgrades) increased 10.5% from $11,377 in 1995 to $12,573 in 1996 as
a result of increased sales of biennial Vacation Ownership Interests which was
partially offset by the decline in Upgrade sales.

The number of Vacation Ownership Interests sold decreased 16.8% from 1,877
in 1995 to 1,562 in 1996. The average sales price of Vacation Ownership
Interests sold (excluding Upgrades) increased 12.6% from $10,624 in 1995 to
$11,963 in 1996 due primarily to an increase in the number of biennial Vacation
Ownership Interests sold. Sales of Vacation Ownership Interests in 1996 included
1,517 biennial interests (counted as 758 annual Vacation Ownership Interests)
compared to 636 (counted as 318 annual Vacation Ownership

41
<PAGE> 43

Interests) in 1995. The increase in 1996 biennial sales was the result of the
Company's increased sales and marketing efforts in this market segment and its
ability to charge a sales price that was significantly greater than one-half of
the sales price of an annual Vacation Ownership Interest. The increased emphasis
upon sales of biennial Vacation Ownership Interests at higher prices and the
closure of the Phoenix sales office resulted in a reduction in sales of annual
Vacation Ownership Interests from 1,559 in 1995 to 803 in 1996.

Resort operating revenue increased 24.7% from $8.9 million in 1995 to $11.1
million in 1996. The increase reflects a full year of operations in 1996 of both
VCA-South Bend, which opened in mid-August 1995, and Kohl's Ranch, which was
acquired on June 1, 1995.

The 59.1% increase in interest income from $627,081 in 1995 to $997,500 in
1996 is a result of the increased amount of Customer Notes retained by the
Company as well as increased balances of invested cash.

Cost of Vacation Ownership Interests sold as a percentage of Vacation
Ownership Interest sales decreased from 16.5% in 1995 to 15.8% in 1996 due to an
increase in the number of biennial sales.

Sales and marketing costs as a percentage of Vacation Ownership Interests
sales increased from 51.4% in 1995 to 54.4% in 1996 due to a promotional program
in 1996 which offered certain purchasers of Vacation Ownership Interests a
vacation experience (including accommodations, airfare and car rental). While
the cost of the vacation experience was added to the purchase price, it had the
effect of increasing sales and marketing costs as a percentage of sales of
Vacation Ownership Interests. Additionally, 1995 included the recognition of
approximately $513,000 of revenue recognized on the percentage of completion
method but for which marketing costs were recognized in 1994 when incurred.

The decrease in the provision for doubtful accounts as a percentage of
sales of Vacation Ownership Interests from 5.8% in 1995 to 3.0% in 1996 reflects
the expected performance of the portfolio of consumer paper based on the
Company's collection experience in the prior years, both sold and unsold.

The decrease in cost of resort operations as a percentage of resort
operating revenue to 95.1% in 1996 from 105.5% in 1995 reflects lower costs of
operations at Los Abrigados as a percentage of revenue due to increased
occupancy, increased ILX Owner rates and reductions in operating costs, net of
the costs of operations for VCA-South Bend and Kohl's Ranch, which began
operations in 1995 and accordingly had lower occupancy than mature resorts.

General and administrative expenses decreased 38.2% from $3.4 million in
1995 to $2.1 million in 1996 due in part to operating efficiencies in 1996 and
unusual expenses in 1995. General and administrative expense decreased to 6.7%
as a percentage of total timeshare revenues in 1996 from 11.1% in 1995. In 1995,
approximately $400,000 of expenses were recognized relating to a $10 million
convertible bond offering which was abandoned due to the underwriter's inability
to place the bonds. Proceeds from the failed offering were intended for Varsity
Clubs expansion; however, as a result of abandoning the bond offering, the
Company canceled its options on certain Varsity Clubs sites, and $320,000 of
related costs were written off because the Company no longer expected to build
at these sites within the option periods.

The increase in interest expense from $1.3 million in 1995 to $2.0 million
in 1996 reflects an increase in notes payable, including the note payable for
the construction of VCA-South Bend, which interest had been capitalized through
completion in August 1995, the acquisition notes for Kohl's Ranch, Lomacasi
Cottages and the Inn at Los Abrigados, and increased borrowings against consumer
notes receivable.

Income tax expense increased from a benefit in 1995 to a provision in 1996
because 1995 included a reduction in the valuation allowance, reflecting
management's estimate of the future benefit to be derived from the utilization
of Genesis NOL carryovers, and because of increased net income in 1996.

Minority interests are comparable between years. However, 1996 reflects an
increase in Los Abrigados net income between years due to increased hotel
operating income, increased Vacation Ownership Interest sales prices and reduced
costs of Vacation Ownership Interests sold, depreciation and bad debt provision.
For 1995, the minority interests include the minority interest ownership of the
Genesis land parcels sold in 1995.

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<PAGE> 44

Comparison of Year Ended December 31, 1994 to the Year Ended December 31, 1995

Sales of Vacation Ownership Interests increased by 14.1% or $2.7 million to
$21.4 million in 1995 from $18.7 million in 1994. This increase was due to
increased sales from two new properties, VCA-South Bend, which was completed in
1995, and Kohl's Ranch, which was purchased in June 1995. The increase in sales
from these properties was partially offset by a decline in sales at the
Company's other existing resorts. Upgrade revenues, included in Vacation
Ownership Interest sales, were $1.4 million in both 1994 and 1995. The average
sales price per Vacation Ownership Interest sold (including Upgrades) decreased
2.5% from $11,667 in 1994 to $11,377 in 1995 as a result of an increase in the
percentage of sales from VCA-South Bend and Kohl's Ranch, both of which have a
lower average sales price than Los Abrigados Resort and Spa. These lower sales
prices were partially offset by the increase in Upgrade revenue.

The number of Vacation Ownership Interests sold increased 17.0% from 1,604
in 1994 to 1,877 in 1995. The average sales price of Vacation Ownership
Interests sold (excluding Upgrades) decreased 1.6% from $10,795 in 1994 to
$10,624 in 1995, due to the increased percentage of sales from VCA-South Bend
and Kohl's Ranch, both of which have a lower average sales price than Vacation
Ownership Interests in Los Abrigados. This was partially offset by the
recognition of approximately $513,000 in sales of Vacation Ownership Interests
in VCA-South Bend written in 1994, but for which revenue recognition was
deferred until completion of construction in 1995. Sales of Vacation Ownership
Interests in 1995 included 636 biennial Vacation Ownership Interests (counted as
318 annual Vacation Ownership Interests) compared to 519 biennial (counted as
259 annual Vacation Ownership Interests) in 1994.

Resort operating revenue increased by 1.1% from $8.8 million in 1994 to
$8.9 million in 1995, which reflects revenue from VCA-South Bend, which opened
in mid-August 1995, and revenue from Kohl's Ranch, which was acquired on June 1,
1995. These increases were offset in large part by reduced room revenue at Los
Abrigados due to increasing use of the resort by prospective Vacation Ownership
Interest purchasers and ILX Owners and decreasing availability of rooms for
resort guests, and the closure of the Canyon Rose dining room at Los Abrigados
for four months in 1995 for remodeling and designation of the restaurant as a
steak house and a cigar and billiards room.

The 55.8% increase in interest income from $402,596 in 1994 to $627,081 in
1995 is a result of the increased amount of Customer Notes retained by the
Company.

Cost of Vacation Ownership Interests sold as a percentage of sales of
Vacation Ownership Interests increased from 12.8% in 1994 to 16.5% in 1995 due
to increased sales of Vacation Ownership Interests in VCA-South Bend, which have
a higher percentage product cost than Los Abrigados.

Sales and marketing as a percentage of Vacation Ownership Interest sales
decreased from 54.2% in 1994 to 51.4% in 1995 primarily due to advertising and
promotion costs which were incurred and expensed related to the start up of
sales activity of VCA-South Bend in 1994, but for which approximately $513,000
of the revenue was not recognized until 1995 when the facility was completed and
ready for occupancy.

The increase, as a percentage of sales of Vacation Ownership Interests, of
the 1995 doubtful accounts provision to 5.8% as compared to 4.1% in 1994
reflects the then expected performance of the paper generated in 1995.

The cost of resort operations as a percentage of revenues increased from
89.1% in 1994 to 105.5% in 1995 due to the start up of operations at Kohl's
Ranch and VCA-South Bend and due to decreased occupancy of traditional resort
guests at Los Abrigados as ILX Owners and prospective purchasers, who pay
substantially reduced rates for their room usage, utilize a greater portion of
the facilities. Occupancy at Kohl's Ranch was impacted by room renovations
during 1995 which reduced the number of rooms available for rent. Kohl's Ranch
resort operating expenses in 1995 included repairs, landscaping, cleaning and
training associated with start up of the operation. Occupancy at VCA-South Bend
was low in 1995 due to minimal pre-opening marketing of the facility to groups
and individual hotel guests.

General and administrative expenses increased 88.9% from $1.8 million in
1994 to $3.4 million in 1995 because 1995 reflects the expense of approximately
$400,000 in bond offering costs, and also the write-off of

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<PAGE> 45

approximately $320,000 in costs for Varsity Clubs sites and associated
development costs. The Company abandoned its plans for a $10 million convertible
bond offering in December 1995 because of the underwriter's inability to timely
place the bonds. The proceeds of the bond offering were intended to be used for
expansion of Varsity Clubs. The Company canceled its options on various Varsity
Clubs sites because it no longer expected to construct these sites within the
option period. In 1995, general and administrative expenses also reflect the
start up of VCA-South Bend.

Sales of land and the associated cost of land sold and other in both 1994
and 1995 reflect the sale of unimproved real property and sales of Red Rock
Collection products. In 1994, the Company's sales include the sale of subdivided
lots and a large, unimproved parcel. In 1995, the Company's sales include sales
of three large, unimproved parcels.

The increase in interest expense from $666,141 in 1994 to $1,265,227 in
1995 reflects an increase in notes payable, including the note payable for the
construction of VCA-South Bend, the Kohl's Ranch acquisition notes, a full year
of interest on the notes arising from the 1994 acquisition of the LAP Class A
partnership interest and increased borrowings against Customer Notes. The
Company elected to finance its Kohl's Ranch Customer Notes and a portion of its
Golden Eagle consumer notes by hypothecating the notes, rather than selling the
notes, because of the favorable installment tax treatment available for
hypothecated notes.

Income tax benefits increased from $161,799 in 1994 to $547,216 in 1995. In
1994, tax benefits resulted from decreases in the valuation allowance as a
result of the ability to utilize loss carryforwards and built in losses arising
from Los Abrigados and from Genesis loss carryforwards. 1995 tax benefits
reflect the elimination of the remaining valuation allowance on the Genesis net
operating loss carryforwards. The elimination was based on the development of
tax strategies from which management concluded the loss carryforwards would more
likely than not be utilized. A valuation allowance had been established to
reflect the uncertainty of the utilization of Los Abrigados deferred tax assets
and the Genesis net operating loss carryforwards.

The decrease in minority interests from $1.4 million in 1994 to $0.5
million in 1995 reflects the acquisition of the LAP Class A limited partnership
interests effective July 1994, the decrease in LAP net income in 1995 and
differences in minority interest ownership of the Genesis parcels sold in 1994
and 1995. The decrease in LAP net income between years is a result of closure of
the Phoenix Sales Office and reduced profitability of Los Abrigados hotel
operations due to decreased availability of rooms for resort guests.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

The Company generates cash primarily from the sale of Vacation Ownership
Interests (including Upgrades) and the financing of Customer Notes from such
sales and from resort operations. During the years ended December 31, 1994, 1995
and 1996 and the nine months ended September 30, 1996 and 1997, cash provided by
(used in) operations was $4.0 million, $(.7) million, $4.0 million, $2.5 million
and $3.0 million, respectively. The negative cash flow in 1995 was due primarily
to an increase in resort property held for timeshare sales of $4.4 million
resulting from the completion of construction and opening of VCA-South Bend,
which was financed primarily through borrowings of $4.2 million in 1995. 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 normal operations. See "Risk
Factors -- Financing Customer Borrowings" and "Risk Factors -- Borrower
Defaults."

44
<PAGE> 46

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 which would be paid on the deferred taxes related to the installment
method as the interest expense is not estimable.

At December 31, 1996, the Company, excluding Genesis, had NOL carryforwards
of $3.6 million, which expire in 2001 through 2012. At December 31, 1996,
Genesis had federal NOL carryforwards of $2.3 million which expire in 2008 and
state NOL carryforwards of $0.4 million which expire in 1998. The Genesis losses
are limited as to usage because they arise from built in losses of an acquired
company and can only be utilized through earnings of Genesis.

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 on 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. See "Risk Factors -- Acceleration of Deferred Taxes and Net
Operating Loss Carryforward Limitations" and Note 8 of Notes to Consolidated
Financial Statements.

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 years
ended December 31, 1994, 1995 and 1996 and for the nine months ended September
30, 1996 and 1997 was $2.1 million, $3.2 million, $3.5 million, $3.3 million and
$5.8 million, respectively. Cash used in investing activities increased 2.5
million for the nine months ended September 30, 1997 compared to the comparable
period in 1996, due to the Company's purchase of the minority interest in LAP
(see Note 11 to Consolidated Financial Statements) which included a cash payment
of approximately $820,000 and due to the Company's strategy of hypothecating its
Customer Notes rather than selling them.

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 million. Construction of the facility commenced in 1997 and is expected to be
completed in the first quarter of 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 September 30, 1997, $1.6
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 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. See "Risk Factors -- Borrower Defaults," "Risk
Factors -- Financing Customer Borrowings" and "Risk Factors -- Development,
Construction and Property Acquisition Activities."

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<PAGE> 47

Credit Facilities

The Company has agreements with financial institutions for total
commitments aggregating $20.0 million under which the Company may sell certain
of its customer notes receivable. 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
September 30, 1997, approximately $8.0 million is available under these
commitments.

The Company also has financing commitments aggregating $14.2 million
whereby the Company may borrow against notes receivable pledged as collateral.
These borrowings bear interest at a rate of prime plus 3.25% to prime plus 5%
and expire at various dates from 1998 through 2003. At September 30, 1997,
approximately $8.1 million is available under these commitments.

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.
See "Risk Factors -- Leverage."

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. See "Risk Factors -- Risks of Rapid Growth" and "-- Seasonality
and Variability of Quarterly Results."

YEAR 2000 ISSUES

As with other organizations, 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 for the nine months ended September 30, 1997.
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.

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<PAGE> 48

BUSINESS

THE COMPANY

ILX is one of the leading developers, marketers and operators of timeshare
resorts in the Western United States. The Company's principal operations consist
of (i) acquiring, developing and operating timeshare resorts, marketed by the
Company as vacation ownership resorts, (ii) marketing and selling Vacation
Ownership Interests in the timeshare resorts, which typically have entitled the
buyers thereof to ownership of a fully-furnished unit for a one-week period on
either an annual or an alternate year (i.e. biennial) basis, and (iii) providing
purchase money financing to the buyers of Vacation Ownership Interests at its
resorts. In addition, the Company receives revenue from the rental of its unused
or unsold inventory of units at its vacation ownership resorts, and from the
sale of food, beverages and other services at such resorts. The Company's
current portfolio of ILX Resorts consists of four resorts in Arizona, one in
Indiana, and one in Colorado, and the Company is constructing a seventh resort
in Tucson, Arizona. At September 30, 1997, the ILX Resorts (excluding the Tucson
property currently under construction) represented an aggregate of 391 units and
20,181 sold and unsold one-week Vacation Ownership Interests. Upon completion of
the Tucson property currently under construction, the Company expects to own an
aggregate of 453 units, comprising 23,405 (sold and unsold) one-week Vacation
Ownership Interests. The Company also markets the Additional Interests, which
consisted, at September 30, 1997, of an aggregate of approximately 81 Vacation
Ownership Interests in destination resorts owned by others and located in
Florida, Mexico and elsewhere, and the rights to market Vacation Ownership
Interests in four destination resorts owned by an unaffiliated third party and
located on the island of Kauai, Hawaii.

The Company believes it was able to purchase the ILX Resorts and the
Additional Interests at relatively attractive prices because of its skill in
locating, identifying and acquiring distressed or underdeveloped resorts and
Vacation Ownership Interests. The Company successfully utilized this strategy in
connection with Los Abrigados in Sedona, Arizona (175 units), the Kohl's Ranch
Lodge in Payson, Arizona (52 units) and, most recently, the Roundhouse Resort in
Pinetop/Lakeside, Arizona (59 existing units owned by current owners of Vacation
Ownership Interests and planned expansion of approximately 100 units).

Utilizing management's development expertise, the Company developed and
implemented the Varsity Clubs concept. This concept entails ground-up
development of urban vacation ownership properties strategically situated in
tourist destinations which are accessible to major population centers near
prominent colleges and universities. The first Varsity Club, VCA-South Bend,
consisting of 62 units, was completed in August 1995 and is located
approximately three miles from the University of Notre Dame in South Bend,
Indiana. Construction of a second Varsity Club, VCA-Tucson, consisting of 62
planned units, located near the University of Arizona in Tucson, Arizona, is
scheduled for completion in the first quarter of 1998. The scope of the
Company's activities since 1991 have enabled the Company's management team,
which has significant experience in the vacation ownership resort and real
estate development industries, to establish substantial in-house capabilities in
areas critical to the Company's operating and growth strategies, including
property identification and acquisition, property development and
rehabilitation, and Vacation Ownership Interest sales and marketing.

The quality and customer appeal of the Company's resorts has been
recognized by several industry awards and travel publications. RCI and II, the
exchange networks in which ILX Owners may participate,

47
<PAGE> 49

assign ratings to the vacation ownership properties which members own. Gold
Crown and Five-Star are the highest ratings assigned by RCI and II,
respectively, and are awarded to only 5% of the participating resorts. The
Company's Los Abrigados resort has been awarded Gold Crown status by RCI and
Five-Star status by II. Each of VCA-South Bend and VCA-Tucson have also received
Five-Star status by II. In addition, the ILX Resorts and several of the resort
restaurants have received numerous local and national recognitions.
Specifically, Los Abrigados has been awarded the Wine Spectator Award of
Excellence for 10 consecutive years. In addition, the Red Rock Fantasy, a
22-acre themed light extravaganza hosted by Los Abrigados for the past seven
years, has received substantial national and local media coverage, including
television coverage by CNN, TNN, NBC, Fox and CBS and print media coverage by
USA Today, Better Homes and Gardens, The Denver Post, The Arizona Republic and
America West Airlines Inflight Magazine.

The Company is pursuing a two-pronged operating strategy which focuses on
marketing Vacation Ownership Interests in the Company's CARs and in its Varsity
Clubs. CARs are typically high-quality vacation ownership resorts situated in
settings of natural beauty and located within convenient and inexpensive
travelling distance from major population centers (currently Phoenix and
Denver). The Company's CARs are intended to facilitate more frequent
"short-stay" getaways, which the Company believes is an increasingly popular
vacation trend. As of September 30, 1997, the Company operated five CARs
consisting of 329 units and held 5,537 unsold Vacation Ownership Interests in
those CARs. The Company's inventory of CARs has been marketed primarily by ILX
employees at the Company's on-site sales offices located at or near selected ILX
Resorts.

Although purchasers will continue to be able to purchase Vacation Ownership
Interests at any individual ILX Resort or an Additional Interest, commencing in
1998, the Company's inventory of CARs will be marketed through membership
interests in its proprietary branded Premiere Vacation Club. The Premiere
Vacation Club offers purchasers a deeded one-week membership interest which may
be used at any time between certain specified dates at any one of the ILX
Resorts included in the Premiere Vacation Club, or may be split into multiple
stays of shorter duration at any combination of such resorts. In addition,
Premiere Vacation Club membership interests may be exchanged for a stay at other
resorts through the major national exchange networks in which ILX Owners may
participate, such as RCI and II. Substantially all of the Company's inventory of
Vacation Ownership Interests, including those at its Varsity Clubs and those to
be included in the Premiere Vacation Club, qualify as "red time," the highest
demand classification for purposes of participation in such exchange networks.
The Company believes that its Premiere Vacation Club concept will be appealing
to customers because of its emphasis on flexible use options (e.g., floating
days, two-day uses and the ability to split a purchased membership interest),
locations within convenient driving distances from major metropolitan areas and
other features (e.g. high quality amenities and food and beverage discounts at
its participating ILX Resorts).

In addition to marketing through its Premiere Vacation Club, the Company
intends to aggressively pursue the expansion of its proprietary branded Varsity
Club concept. The Company will focus on development of additional Varsity Clubs
in areas with a significant base of existing tourism and access to major
population centers, which are located near prominent colleges and universities
in the Western United States. The Company completed construction and commenced
operations of its prototype Varsity Club property, VCA-South Bend, located near
the University of Notre Dame, in 1995. Construction of a second Varsity Club,
VCA-Tucson, located near the University of Arizona in Tucson, Arizona, is
expected to be completed in the first quarter of 1998. The Company intends to
develop its Varsity Club properties at attractive locations for visiting
tourists who may rent accommodations or purchase a Vacation Ownership Interest
from the Company. In connection with the purchase of a Vacation Ownership
Interest, Varsity Clubs offer area residents an urban "city club" experience
with unlimited day-use privileges, as well as the opportunity to participate in
the II Vacation Ownership Interest exchange network. The Company believes that
Varsity Clubs offer features common to a "city club", including a fitness
center, swimming pool, bar, restaurant/lounge, billiards and large
sitting/welcome room. In addition, the Varsity Clubs concept enables the Company
to enlarge the Company's target list of potential purchasers by utilizing an
identification with the local university to market Vacation Ownership Interests
to alumni, sports season ticket holders, parents of university students and
corporate sponsors of university events, among others, who attend the sporting,
academic and cultural events regularly hosted by various universities, thereby
enlarging the Company's target

48
<PAGE> 50

base of potential purchasers. Varsity Clubs offer a flexible ownership structure
which permits the purchase of Vacation Ownership Interests consisting of a
single day, a collection of single days (such as selected days during an entire
specified sports season) or a traditional one-week period, in addition to
unlimited use of the common areas for "city club" use. The Company believes that
direct marketing to a large target base of potential purchasers with university
affiliations will enable the Company to achieve premium pricing with respect to
those portions of its inventory which coincide with high demand for
accommodations at prominent university-sponsored events. The Company also
believes that its success in gaining access to alumni and other target potential
purchasers with relationships to the University of Notre Dame or the University
of Arizona may facilitate similar arrangements with other universities in the
areas in which future Varsity Clubs are developed.

The Company had over 10,000 existing ILX Owners at September 30, 1997.
During 1996, the Company sold 2,320 annual and biennial Vacation Ownership
Interests at the ILX Resorts, compared to 2,195 and 1,864 during 1995 and 1994,
respectively. During the nine months ended September 30, 1997, the Company sold
1,867 annual and biennial Vacation Ownership Interests at the ILX Resorts,
compared to 1,769 during the nine months ended September 30, 1996. The average
sales price for a Vacation Ownership Interest (excluding sales of Upgrades) was
$10,994 for an annual interest and $6,506 for a biennial interest, resulting in
a weighted average price of $11,963 (each biennial interest is treated as
one-half of an annual interest)during the year ended December 31, 1996 and
$11,326 for an annual interest and $6,908 for a biennial interest, resulting in
a weighted average price of $12,602 during the nine months ended September 30,
1997. At September 30, 1997, the Company had an existing inventory of 7,437
unsold Vacation Ownership Interests (including Vacation Ownership Interests in
the CARs, VCA-South Bend and the Additional Interests) and a master plan,
subject to consumer demand, receipt of applicable permits and other
contingencies generally applicable to real estate development, to construct up
to 11,438 (including 3,224 to be constructed at VCA-Tucson) additional Vacation
Ownership Interests through 1999 and thereafter at the existing ILX Resorts. See
"Risk Factors -- Risks of Rapid Growth."

THE VACATION OWNERSHIP INDUSTRY OVERVIEW

The Market. The vacation resort industry consists primarily of commercial
lodging operators and vacation ownership resorts. Commercial lodging typically
consists of (i) hotels and motels which rent individual rooms on a nightly,
weekly or monthly basis and (ii) rental of privately owned condominium units or
homes. These facilities often prove uneconomical for frequent or long-term
leisure travelers, particularly vacationing families. In addition, rates and
availability are often unpredictable and sometimes change.

Vacation ownership resorts are gaining in popularity as a relatively
economical and convenient alternative to commercial lodging establishments.
"Vacation ownership" is defined by ARDA as the right to accommodations at a
vacation development for a specified period each year, for a specified number of
years or for perpetuity. Buyers of Vacation Ownership Interests pay for a
specified occupancy right and generally pay an annual maintenance fee, which
typically ranges from $300 to $600 per unit to cover the management and upkeep
of the resort. Vacation ownership resorts allow buyers to essentially pre-pay
for their vacation, while securing vacation accommodations and controlling room
cost. Vacation ownership resorts often provide comparable locations and greater
amenities at a decreased cost as compared to commercial lodging. In addition,
such resorts generally offer superior accommodations in terms of unit size.

Worldwide Market. The worldwide vacation ownership industry has
experienced rapid growth since its inception in Europe in the mid-1960s. In 1994
(the most recent year for which such statistics are available), the worldwide
vacation ownership industry grew to approximately $4.8 billion in sales, from
$3.2 billion in 1990. Also in 1994, the worldwide industry grew to approximately
3.1 million owners as compared to 1.8 million in 1990. The worldwide vacation
ownership industry has grown to around 4,145 timeshare resorts in 1995 (the most
recent year for which such statistics are available), from approximately 500
timeshare resorts in 1980. From 1980 through 1994, 4.9 million Vacation
Ownership Interests have been purchased for total sales of approximately $36.7
billion. As shown in the following graphs, the worldwide vacation ownership
industry has expanded significantly since 1980 both in Vacation Ownership
Interest sales and the number of Vacation Ownership Interest owners.

49
<PAGE> 51

<TABLE>
<CAPTION>
Measurement Period Dollar Volume of Vacation
(Fiscal Year Covered) Interval Sales|(in billions)
<S> <C>
1980 0.49
1981 0.965
1982 1.165
1983 1.34
1984 1.735
1985 1.58
1986 1.61
1987 1.94
1988 2.39
1989 2.97
1990 3.24
1991 3.74
1992 4.25
1993 4.505
1994 4.76
</TABLE>

<TABLE>
<CAPTION>
Measurement Period Number of Vacation Interval
(Fiscal Year Covered) Owners|(in thousands)
<S> <C>
1980 155
1981 220
1982 335
1983 470
1984 620
1985 805
1986 970
1987 1125
1988 1310
1989 1530
1990 1800
1991 2070
1992 2363
1993 2760
1994 3144
</TABLE>

Source: The 1995 Worldwide Resort Timeshare Industry, ARDA Report.

50
<PAGE> 52

United States Market. First introduced to the United States in the 1970s,
the vacation ownership industry has experienced significant growth, with the
number of vacation ownership resorts in 1997 increasing to 1,204 vacation
ownership resorts from 870 resorts in 1993. Similarly, the number of households
owning Vacation Ownership Interests has increased to 1.8 million households in
1997 from 1.3 million households in 1993. During 1996, the United States
vacation ownership industry sold a total of 218,000 one-week Vacation Ownership
Interests at an average price of $10,000 each, for a total sales volume of $2.2
billion, which is a 69.2% increase from 1993 when the vacation ownership
industry sold a total of 168,840 one-week Vacation Ownership Interests at an
average price of $7,000 each, for a total sales volume of $1.3 billion. Despite
the growth experienced in the industry, vacation ownership had only achieved a
1.72% market penetration of all U.S. households at December 31, 1994.

Western United States Market. According to ARDA, in the Western United
States there exist approximately 379 vacation ownership resorts with over
550,000 owners and $746 million of total sales in 1996 (representing 68,200
one-week Vacation Ownership Interests). The Western United States accounted for
approximately 34% of the total vacation ownership sales in the United States in
1996. The Company focuses its acquisition and development efforts in the Western
United States, where favorable demographic growth trends currently exist and are
projected to continue for the foreseeable future. According to the U.S. Census
Bureau, the Western United States is projected to have the highest population
growth rate of any region in the nation. The number of persons in the Western
United States grew to an estimated 57.1 million in 1995 from 52.2 million in
1990 and is predicted to increase to approximately 60.8 million by 2000. While
the Western United States population grew by 10.5% between 1990 and 1995, and is
projected to grow by 6.5% from 1995 to 2000, the total U.S. population grew and
is projected to grow by less than 6.0% in each such time period.

The Consumer. According to ARDA, the median age of a Vacation Ownership
Interest owner in the United States in 1997 was 50 years, while the median
annual household income of a U.S. Vacation Ownership Interest owner in 1997 was
approximately $71,000. While demographics differ by property, historically
through 1997, the typical age and annual income of an ILX Owner has been from
between 40 to 55 years and in excess of $50,000, respectively. According to the
1990 U.S. Census study, the 40 to 55 age group comprised 17.3% of the U.S.
population, and households with an aggregate income exceeding $40,000 comprised
35.6% of U.S. households. As demonstrated by the first graph below, the number
of persons in the United States between the ages of 40 and 55 grew to an
estimated 51.4 million in 1995 from 43.1 million in 1990 and is predicted to
increase to approximately 59.5 million by 2000. This represents estimated growth
of 19.3% between 1990 and 1995, and the U.S. Census Bureau predicted this
population group to grow 15.8% from 1995 to 2000. In comparison, the U.S. Census
Bureau reported that the total U.S. population grew and is projected to grow by
less than 6.0% in the same time periods.

51
<PAGE> 53

<TABLE>
<CAPTION>
Estimated US Population Growth
Measurement Period in the 40-55 Year Age Group(1)
(Fiscal Year Covered) (in millions)
<S> <C>
1990 43.1
1995 51.4
2000 59.5
2005 63.9
</TABLE>

(1) Source: 1996 U.S. Census Bureau Study, Population Projections of the United
States by Age, Sex, Race, and Hispanic Origin: 1995 to 2050, March 1996

As can be seen in the graph below, the Western United States, the Company's
target acquisition and development region, experienced a 27.8% increase in the
40 to 55 year age group from 1990 to 1995, and is estimated by the U.S. Census
Bureau to grow 17.4% between 1995 and 2000.

<TABLE>
<CAPTION>
Estimated Western US
Population Growth in the 40-55
Measurement Period Year Age Group (2) (in
(Fiscal Year Covered) millions)
<S> <C>
1990 9
1995 11.5
2000 13.5
2005 14.8
</TABLE>

(2) Source: 1996 U.S. Census Bureau Study, Population Projections of the United
States by Age, Sex, Race, and Hispanic Origin: 1995 to 2025, October 1996

52
<PAGE> 54

Reasons for Growth. The Company believes that this growth trend in the
vacation ownership industry is a result of certain shifts in customer
satisfaction and changes in consumer perceptions of vacation ownership.
Management believes that these trends are attributable to the following factors,
among others:

- Increased flexibility and options associated with vacation ownership;

- Improved quality and management of vacation ownership resorts and related
amenities;

- Improved customer perception of the value and quality of vacation
ownership, as compared to other vacation lodging alternatives;

- Demographic trends resulting in a greater base of customers meeting the
profile of a typical Vacation Ownership Interest purchaser;

- Growth of exchange networks, such as II and RCI;

- Increased customer protection regulation of the vacation ownership
industry;

- Increased participation of brand name lodging companies; and

- Greater access to financing for purchasers.

The Vacation Ownership Interest industry historically has been highly
fragmented and dominated by a very large number of local and regional resort
developers and operators, each with limited portfolios of differing quality.
Ragatz Associates, a long-time vacation ownership industry research group,
estimates that there were approximately 200 operators of approximately 294
resorts actively selling Vacation Ownership Interests in 1996 in the United
States, with no single operator controlling more than 10% of the total vacation
ownership resorts in the United States. More recently, there has been a
consolidating trend among Vacation Ownership Interest developers and operators.
In addition, many of the world's most widely-recognized lodging, hospitality and
entertainment companies have begun to develop and sell Vacation Ownership
Interests under their brand names, including Marriott Ownership Resorts, The
Walt Disney Company, Hilton Hotels Corporation, Hyatt Corporation, Four Seasons
Hotels & Resorts and Promus Hotel Corporation. The Company believes that the
entry of such participants into the vacation ownership industry is one of the
most significant factors contributing to the industry's current success. The
Company believes that national lodging and hospitality companies are attracted
to the Vacation Ownership Interest industry because of its relatively low
product cost and high profit margins and the recognition that Vacation Ownership
Interests provide an attractive alternative to the traditional hotel-based
vacation and allow traditional hotel companies to leverage their brands into
additional resort markets where demand exists for accommodations beyond
traditional hotels. See "Risk Factors -- Competition."

According to an ARDA study dated 1997, the three primary reasons cited by
consumers for purchasing a Vacation Ownership Interest are (i) the ability to
exchange the Vacation Ownership Interest for accommodations at other resorts
through exchange networks such as RCI and II, (ii) the quality and appeal of the
resort at which they purchased a Vacation Ownership Interest, and (iii) the
money savings over traditional resort vacations. According to a 1995 ARDA study,
Vacation Ownership Interest buyers have a high rate of repeat purchases:
approximately 41% of all Vacation Ownership Interest owners own more than one
interval, representing approximately 65% of the industry inventory, and
approximately 51% of all owners who bought their first Vacation Ownership
Interest before 1985 have since purchased a second Vacation Ownership Interest.
In addition, customer satisfaction increases with length of ownership, age,
income, multiple location ownership, and accessibility to Vacation Ownership
Interest exchange networks.

GROWTH STRATEGY

The Company believes that its experienced management team, substantial
in-house operating and development capabilities and two-pronged marketing
strategy, position the Company to capitalize on the

53
<PAGE> 55

growth trends in the vacation ownership resort industry. The Company intends to
continue to grow by implementing the following strategies:

Develop Additional Properties. The Company believes its inventory of
Vacation Ownership Interests can be significantly and prudently increased
through the development of additional Varsity Clubs, as well as development
of additional CARs, to be marketed through its Premiere Vacation Club. The
Company successfully completed development of its VCA-South Bend in August
1995, which will serve as the prototype for additional Varsity Clubs.
Construction of the planned 62-unit VCA-Tucson near the University of
Arizona commenced in August 1997 and is expected to be completed in the
first quarter of 1998 at an estimated aggregate cost of $7 million. The
Company intends to develop additional Varsity Clubs using the same general
design concepts, architectural plans and construction specifications which
were established at VCA-South Bend, and which are being implemented in the
development of VCA-Tucson. The Company believes there exist numerous sites
in the Western United States which are accessible to major population
centers and local tourist attractions and are proximate to universities
with prominent athletic and cultural activities so as to make them
appropriate for the development of additional Varsity Clubs. The Company
intends to initiate development of a minimum of five Varsity Clubs in the
next three years. Areas in which the Company is currently investigating the
potential development of additional Varsity Clubs include Tempe, Arizona;
Boulder, Colorado; Las Vegas, Nevada; Palo Alto, California; and Seattle,
Washington. However, no contracts or commitments currently exist for any
such proposed locations. See "Risk Factors -- Risks of Rapid Growth" and
"Risk Factors -- Competition."

Acquire and Redevelop Additional Resorts. The Company has
historically expanded and enhanced its portfolio of vacation ownership
resorts primarily through the acquisition and redevelopment of CARs located
in settings of natural beauty, which the Company believes have been
available at relatively attractive prices from sellers who have
underutilized or underdeveloped the resorts or are in distressed
situations. By acquiring such resorts at relatively favorable prices and
utilizing the Company's substantial in-house development capabilities to
expand and enhance the resorts' Vacation Ownership Interest inventory, the
Company has been able to achieve favorable overall inventory investment
costs relative to the vacation ownership industry. During 1996, the
Company's average cost of Vacation Ownership Interests sold as a percentage
of Vacation Ownership Interest sales at ILX Resorts was 15.8%, and for
Vacation Ownership Interests which it acquired (as opposed to developed
from ground up) the average cost was 13.7%. Both of the foregoing
percentages compare favorably to the vacation ownership industry's median
product cost as a percentage of net sales of between 20.1% and 25.%, as
reported in ARDA's Financial Performance Digest 1997.

54
<PAGE> 56

Vacation Club, as individual ILX Resorts or a combination thereof. The
Company believes that its Premiere Vacation Club will afford greater
flexibility in the acquisition of additional vacation ownership resorts to
the extent that small or remote resorts which may not otherwise be
attractive to purchasers of Vacation Ownership Interests at a single resort
may significantly enhance the consumer appeal of a membership interest in
the Premiere Vacation Club. The Company believes these types of resorts can
be acquired at relatively attractive prices since other potential
purchasers are likely to lack the resources to market such vacation
ownership resorts effectively and, therefore, be unwilling to pay higher
prices for them. Although it has no binding agreements and there can be no
assurance that the Company will consummate any of such acquisitions, the
Company is currently engaged in active negotiations with respect to several
potential vacation ownership resort acquisitions, See "Risk
Factors -- Risks of Rapid Growth."

Expand Existing ILX Resorts. The Company intends to capitalize upon
opportunities to expand the existing ILX Resorts. The Company believes
development of additional units at existing ILX Resorts is generally the
most economical means of growing the Company's Vacation Ownership Interest
inventory and sales profits because the fixed costs associated with
developing the necessary infrastructure (i.e., lobby areas, restaurant and
pools) need not be incurred and may be spread over a larger number of
units. Currently, the Company's expansion plans during 1998 include the
development of approximately 20 units at Los Abrigados, 24 units at
VCA-South Bend, 12 units at Kohl's Ranch and as many as 40 units at the
Roundhouse Resort. The Company anticipates increasing its inventory of
Vacation Ownership Interests through expansion of existing ILX Resorts by
approximately 8,300 weeks during 1998 (including 3,224 currently under
construction at VCA-Tucson).

Increase Sales of Vacation Ownership Interests to ILX Owners. The
Company seeks to increase sales and profitability at its ILX Resorts and
with respect to the Additional Interests by selling Upgrades. The Company
believes that ILX Owners have a better understanding of a Vacation
Ownership Interest than first-time buyers, are generally familiar with the
ILX Resorts and, based on historical experience, have a demonstrated
tendency to take vacations, which results in a higher percentage of sales
from marketing efforts to ILX Owners than to prospective purchasers who
have never purchased a Vacation Ownership Interest. The Company intends to
begin marketing Upgrade sales in its Premiere Vacation Club to ILX Owners
in early 1998. The Company's sales to ILX Owners have increased from $0.7
million of Upgrades in the nine months ended September 30, 1996 to $2.2
million of Upgrades in the nine months ended September 30, 1997.

Increase Net Income from Customer Financing Transactions. From
January 1, 1994 through September 30, 1997, approximately 20% to 25% of the
Company's sales were on a cash basis and the Company provided financing for
the remaining 75% to 80% of its sales of Vacation Ownership Interests.
Buyers who finance their purchase of Vacation Ownership Interests are
required by the Company to make a down payment of at least 10% of the total
sales price and may pay the balance to the Company over a period of seven
years pursuant to a promissory note wherein the Company is the lender
("Customer Notes"). At September 30, 1997, the Company had a portfolio of
retained Customer Notes with an aggregate principal amount of $14.8
million.

Prior to 1995, the Company sold the majority of its Customer Notes and
retained only the small remaining portion, which it then hypothecated.
Since 1995, the Company has steadily increased the amount of Customer Notes
which it hypothecates and, as a result, at September 30, 1997, the Company
had retained Customer Notes in an aggregate outstanding principal amount of
$14.8 million as compared to $7.9 million at December 31, 1995. Because the
Company has historically financed its operations through the sale of a
substantial majority of its Customer Notes, the Company's net income from
customer financing transactions (i.e., the spread between the interest
charged to borrowing customers and the Company's borrowing costs) has been
limited. Although there can be no assurance in this regard, the Company
believes that the closing of this Offering and the reduction of its current
indebtedness will allow the Company to arrange more favorable Customer
Notes' financing, which will in turn enable the Company to retain a
significantly greater percentage of its Customer Notes, and, thus, increase
the net income in the event of favorable interest rate differences. See
"Risk Factors -- Financing Customer Borrowings, Liquidity Risks."

55
<PAGE> 57

The Company believes its relatively high rate of cash sales and low rate of
defaults on Customer Notes is due in part to the relatively high customer appeal
of the ILX Resorts and the credit due diligence pre-approval process performed
by the Company and its lenders. During 1996 and 1997, the Company provided for
uncollectible Customer Notes by reserving 3% of its gross sales (including cash
sales) as an allowance for doubtful accounts. At September 30, 1997, the Company
had reserved $3.0 million for possible credit losses. Management believes this
amount is sufficient to cover anticipated losses from defaults on Customer
Notes, however there can be no assurance in this regard. At September 30, 1997,
$3.2 million in principal, or 8.3%, of the retained Customer Notes and Customer
Notes previously sold, which are recourse to the Company, were more than 90 days
past due. See "Risk Factors -- Financing Customer Borrowings; Liquidity Risks"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

THE RESORTS

The table below sets forth certain information, as of September 30, 1997,
with respect to the ILX Resorts. The information set forth below does not
include the Company's planned expansion of the ILX Resorts or development of
additional Varsity Clubs and CARs, except for VCA-Tucson, construction of which
has commenced and for which all governmental permits have been obtained.

<TABLE>
<CAPTION>
SIZE OF RESORT AMENITIES
UNITS(2) ----------------------------------------------------------
--------------- RESTAURANT/ WHIRLPOOL/ SWIMMING FITNESS LOCAL
RESORTS(1) LOCATION S 1BR 2BR LOUNGE SPA POOL CENTER AMENITIES(3)
- --------------------------- ----------------------- ---- --- --- ----------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Convenient Access Resorts
Los Abrigados Resort & Spa Sedona, AZ 158 17 4/1 Y Y-2 Y T,G,Sh,B,
BB,BL,F,
FW,D,H,
TH,V,MT
The Inn at Los Abrigados Sedona, AZ 9 1 4/1 Y Y-2 Y T,G,Sh,B,
BB,BL,F,
FW,D,H,
TH,V,MT
Kohl's Ranch Lodge Payson, AZ 42 4 6 1/2 Y Y Y H,F,TH,C,
Sh,D,G,V,
B,BB,FW
Roundhouse Resort Pinetop/Lakeside, AZ 19 30 10 1/1 Y Y Y G,SS,H,C,
TH,MT, FW
Golden Eagle Resort Estes Park, CO 9 21 3 1/1 Y Y N H,TH,F,G,
Sh,D,FW,
BL
-- --
---
Total CARs 79 213 37
Varsity Clubs of America(3)
VCA -- South Bend South Bend, IN 3 54 5 1/1 Y Y Y UC,M,G,
Sh,D,B,
BB,BL,MT
VCA -- Tucson Tucson, AZ 4 46 12 1/1 Y Y Y UC,M,BL,
G,T,MT,D,
Sh
-- --
---
Total Varsity Clubs 7 100 17
-- --
---

Total 86 313 54
== === ==
</TABLE>

- ---------------
(1) Information regarding the Additional Interests has not been included in the
following chart, as the Company only owns a number of, or has rights to
market, Vacation Ownership Interests at such resorts and does not own any of
such resorts.

(2) "S" indicates studio unit; "1 BR" indicates one-bedroom unit; "2 BR"
indicates two-bedroom unit. Units with the same number of bedrooms may vary
in size and amenities.

(3) B -- Basketball, BB -- Bocce Ball, BL -- Billiard, C -- Casino, D -- Dining,
F -- Fishing, FW -- Four Wheel Tours, G -- Golf, H -- Horseback Riding,
M -- Museums, MT -- Movie Theater, Sh -- Shopping, SS -- Snow Skiing,
T -- Tennis, TH -- Trail Hiking, UC -- University Campus, V -- Volleyball.

56
<PAGE> 58

DESCRIPTION OF ILX RESORTS

CONVENIENT ACCESS RESORTS

Los Abrigados Resort & Spa. Los Abrigados is located in Sedona, Arizona,
approximately 110 miles from Phoenix, Arizona. This resort consists of 175 units
situated on approximately 20 acres of lush landscaping and Spanish-styled
plazas, winding walkways and bridges. Los Abrigados offers one- and two-bedroom
units, each with a separate living area, bedroom, mini-kitchen and balcony or
patio. Twenty suites offer a fireplace and whirlpool spa as well. Nine units
offer full kitchenettes. The Los Abrigados resort is designed in Southwestern
decor and surrounded by the dramatic red rocks of Oak Creek Canyon. This resort
has an on-site sales office.

Amenities at the resort include four restaurants and a sports bar,
billiards emporium, library, two pools, tennis courts, sports court, basketball
court, bocce ball courts, fitness center and health spa offering a variety of
personal care services, aerobic and yoga classes, whirlpools, steam and sauna
rooms, hydrotherapy and other personal care facilities. In addition, golf,
horseback riding, jeep, helicopter and hot air balloon rides, and other outdoor
activities are easily accessible. Los Abrigados is both an II Five-Star and RCI
Gold Crown resort.

As of September 30, 1997, Los Abrigados contained 9,100 Vacation Ownership
Interests, of which 2,420 remained available for sale. In addition, the Company
has an option to acquire 107 additional Vacation Ownership Interests at this
resort. The Company believes there exist additional expansion opportunities at
and contiguous to Los Abrigados, however, no contracts, rights or commitments
exist with respect to any of such opportunities.

The Inn at Los Abrigados. The Inn at Los Abrigados is located in Sedona,
Arizona, approximately 110 miles from Phoenix, Arizona. This resort consists of
ten units adjacent to Los Abrigados. The Inn at Los Abrigados consists of the
main Morris House and nine bed and breakfast-style units in three buildings
situated amidst a former apple orchard. The Morris House includes a multi-level
luxury suite sleeping six, and features a sunken living room, full kitchen with
dining area, a loft, two full bathrooms and a private backyard with patio and
barbecue. The bed and breakfast-style units each feature king beds, a sitting
area, microwave, refrigerator, coffee maker, full bath with shower and balcony
or patio. Guests of the Inn at Los Abrigados have charge privileges at and full
use of all Los Abrigados amenities. The Inn at Los Abrigados is an II resort.

The Company acquired the Inn at Los Abrigados in September 1996 at a
purchase price of $750,000 and completed improvements at this resort in the
fourth quarter of 1997. The Company will begin marketing an aggregate of 520
Vacation Ownership Interests at this resort in the first quarter of 1998.

Kohl's Ranch Lodge. Kohl's Ranch is a 10.5 acre property located 17 miles
northeast of Payson, Arizona and approximately 105 miles from Phoenix, Arizona.
It is bordered on the eastern side by Tonto Creek and is surrounded by the Tonto
National Forest, which is believed to be the largest stand of Ponderosa Pines in
the world. Kohl's Ranch consists of 52 units. Forty-one of the units are at the
main lodge, 8 units consist of one- and two-bedroom cabins along Tonto Creek,
and three units are part of a triplex cabin. This resort also has an on-site
sales office.

Kohl's Ranch offers a variety of common area amenities including an outdoor
heated pool, outdoor whirlpool spa, exercise room, putting green, bocce ball
court, children's playground and gazebos and sport court. Kohl's Ranch also
includes a freestanding building that contains food and beverage facilities and
space for additional retail and other operations. Each unit at the resort is
equipped with an air conditioner, telephones, color televisions and
mini-kitchenette or full kitchen, and many have a fireplace. In addition, Kohl's
Ranch offers a unique pet resort. Kohl's Ranch is an RCI resort.

As of September 30, 1997, Kohl's Ranch contained 2,704 Vacation Ownership
Interests, of which approximately 2,027 were available for sale. In addition,
the Company has expansion capabilities at Kohl's Ranch for 12 additional
creekside cabin units (624 one-week Vacation Ownership Interests), which it
intends to develop in 1998.

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Roundhouse Resort. The Company's recently acquired Roundhouse Resort is
located on 9.5 acres in the White Mountains of Northeastern Arizona,
approximately 190 miles from Phoenix, Arizona. Roundhouse Resort currently
consists of 59 units, all of which existed prior to the Company's acquisition of
this resort.

Amenities at the Roundhouse Resort include a restaurant, lounge and
recreation center with indoor pool, raquetball and basketball courts. In
addition, the resort is proximate to golf courses, skiing, horseback riding,
hiking and other outdoor activities. At an elevation of 7,200 feet, the
Roundhouse Resort is set in a location that offers four seasons, a distinct
contrast to Arizona's arid lowlands. Roundhouse Resort is an RCI resort.

As of its acquisition in December 1997, the Roundhouse Resort contained
2,950 one-week Vacation Ownership Interests, all of which were sold by the
previous owners of this resort. However, the Company intends to expand this
resort through the construction of up to 100 additional units (representing up
to 5,200 Vacation Ownership Interests) commencing with 40 units (representing
2,080 Vacation Ownership Interests) in late 1998.

Golden Eagle Resort. The Golden Eagle Resort is a four acre property
located in the town of Estes Park, Colorado, within three miles of Rocky
Mountain National Park and approximately 70 miles from Denver, Colorado. This
resort consists of 33 total units and is bounded generally by undeveloped
forested mountainside land, which offer excellent mountain views from the
resort.

The Golden Eagle Resort is centered around the historic Crag's Lodge, a
four-story wood frame building constructed in the early 1900s, which serves as
the resort's main lodge. Amenities offered at this resort include a restaurant,
bar and library, as well as two other freestanding buildings containing six
guest rooms and support facilities. Each unit at Golden Eagle features a fully
equipped kitchenette, living and dining areas, television and video cassette
player. Additional amenities at this resort include a heated pool and spa as
well as local outdoor attractions. Golden Eagle Resort is an RCI resort.

As of September 30, 1997, the Golden Eagle Resort contained 1,683 one-week
Vacation Ownership Interests, of which 570 were available for sale. In addition,
the Company owns one unit in a residential duplex adjacent to the property,
which is not currently available for sales of Vacation Ownership Interests. The
Company intends to construct two additional units at the resort in 1998 which
would yield an additional 102 Vacation Ownership Interests.

VARSITY CLUBS OF AMERICA

VCA-South Bend. The Company's first Varsity Clubs facility is an
approximately four acre property located approximately three miles from the
University of Notre Dame and Notre Dame Stadium in South Bend, Indiana, which is
90 miles from Chicago, Illinois. The VCA-South Bend offers a total of 62 units,
consisting of studio, one- and two-bedroom suites.

Each one- and two-bedroom suite at VCA-South Bend includes a king master
bedroom, living room with sofa sleeper, kitchenette and whirlpool spa as well as
color television with premium movie channels. Common areas at the resort include
the Stadium Sports Lounge, featuring a theater-wall television in a stadium-type
setting, fitness center with whirlpool spa, outdoor heated pool, bocce ball,
children's playground, billiards room, library, gift shop, business center and
special events facilities. The Company intends VCA-South Bend to serve as a
prototype, subject to modifications and improvements, for the expansion of the
Company's Varsity Clubs concept to other suitable locations, with additional
modifications made as appropriate to suit local tastes and preferences.
VCA-South Bend is an II Five-Star resort.

As of September 30, 1997, this resort contained 3,224 one-week Vacation
Ownership Interests, of which approximately 1,819 were available for sale. The
Company anticipates expanding this resort during 1998 by constructing an
additional 24 units, thereby adding 1,248 one-week Vacation Ownership Interests.
To the Company's knowledge, no other Vacation Ownership Interest resorts exist
proximate to the University of Notre Dame.

VCA-Tucson. The two acre site for the second Varsity Club resort,
presently under construction, is in Tucson, Arizona, approximately three miles
from the University of Arizona and approximately 110 miles from

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Phoenix, Arizona. Upon completion, this resort will consist of 62 units. This
resort is expected to open in the first quarter of 1998.

VCA-Tucson was designed in accordance with the VCA-South Bend prototype,
with certain modifications made to improve operating efficiencies and satisfy
local tastes. Each of the planned one- and two-bedroom suites will feature a
king master bedroom, living room with sofa sleeper, kitchenette, whirlpool spa,
as well as color television with premium movie channels. Amenities at this
resort will include a Sports Lounge designed similar to that at VCA-South Bend,
the Twenty-Four Hour Sports Ticker, touchdown breakfast buffet, Joey Pizza (a
popular restaurant theme originally introduced at Los Abrigados), billiards
room, library, gift shop, fitness center, outdoor heated pool, whirlpool spa,
steam room, children's playground, bocce ball court, business center and special
events facilities. VCA-Tucson has been designated an II Five-Star resort.

Upon its completion, VCA-Tucson will contain approximately 3,224 one-week
Vacation Ownership Interests. The Company intends to begin marketing sales at
this resort in the second quarter of 1998.

ADDITIONAL INTERESTS

In addition to the ILX Resorts, ILX owns or is authorized pursuant to a
marketing agreement to sell a designated number of Vacation Ownership Interests
at additional resorts owned by unaffiliated third parties. At September 30,
1997, the Company owned ten Vacation Ownership Interests at the Ventura Resort
located in Boca Raton, Florida. Purchasers of Vacation Ownership Interests at
Ventura Resort acquire deed and title to a particular unit, which entitles the
purchaser to use of the unit and to use the resort's common area during a fixed
designated time period. As of September 30, 1997, the Company also owned 38
Vacation Ownership Interests at the Costa Vida Vallarta Resort, located on a
private beach, just minutes south of Puerto Vallarta, Mexico. Vacation Ownership
Interests in the Costa Vida Vallarta resort consist solely of contractual use
rights which expire in 2009. The Company also owns one to two Vacation Ownership
Interests in each of a number of additional resorts which it holds for resale.

In addition, the Company has entered into a marketing agreement with Pahio
Resorts, which owns and operates the Pahio at Kauai Beach Villas, Pahio at Bali
Hai Villas, Pahio at the Shearwater and Pahio at Ka' Eo Kai, each on the island
of Kauai, Hawaii. Under the marketing agreement, ILX may market and sell,
subject to regulatory approval, Vacation Ownership Interests in Pahio's four
Hawaii resorts. In 1997, the Company marketed on a limited basis Vacation
Ownership Interests for Pahio at Kauai Beach Villas, which have been approved
for sale in Arizona. Commencing in 1998, the Company may expand its marketing
efforts with respect to the Pahio Resorts as it deems desirable.

OPERATING STRATEGIES

The Company's operating strategy seeks to emphasize the following
characteristics, which management believes provide ILX with certain competitive
advantages within the vacation ownership industry.

Flexible Vacation Ownership Interest Purchase Options. The Company
believes the flexibility associated with its inventory of Vacation
Ownership Interests provides a uniquely appealing opportunity for ILX
Owners. Unlike many of the Company's competitors, substantially all of the
Company's inventory of Vacation Ownership Interests at the ILX Resorts are
intended to be used on dates specified from time to time by the ILX Owner
within a broad range of available dates and not fixed at the time of
purchase. Purchasers of a membership interest in the Company's proprietary
branded Premiere Vacation Club will be entitled to use their interest at
any single CAR or may split up their interest according to the owner's
needs and preferences and used at any number of participating CARs, as well
as thousands of other resorts through the domestic and international
exchange programs in which ILX Owners participate. In addition, Vacation
Ownership Interests at Varsity Clubs may be purchased for highly desirable
single-day uses, a collection of single days (such as designated days
during an entire football or other sports season) or other packages suited
to meet each ILX Owner's preferences.

Customer Satisfaction. The Company believes that its inventory of
highly desirable resorts with extensive amenities combined with flexible
purchase options have resulted in a high level of customer

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satisfaction. Each of the ILX Resorts is located in an area with unique
tourist attractions and offers food, beverage and other amenities
comparable to full-service commercial lodging facilities, at discounted
prices to ILX Owners. As a result, the Company believes ILX Owners
generally have a high level of satisfaction resulting in additional
purchases and increased goodwill. The Company intends to capitalize upon
this by directing a portion of its marketing efforts towards increasing
sales of Vacation Ownership Interests to ILX Owners. See "-- Growth
Strategy" above.

Enhanced Amenities. Excluding the recently acquired Roundhouse
Resort, each of the ILX Resorts has at least one full-service restaurant
and other food and beverage facilities in addition to a range of other
amenities typically found at high-quality resorts, such as horseback
riding, golf, swimming pools and exercise facilities. The Roundhouse Resort
contains a fully equipped restaurant which the Company intends to commence
operating in 1998. The Company believes that most resorts offering Vacation
Ownership Interests have none or only limited restaurant and other food and
beverage facilities. As a result, management believes ILX Owners appreciate
the ability to enjoy traditional full-service commercial hotel amenities
and also maintain the option to use more economical in-room facilities. See
"-- The Resorts."

Demonstrated Ability to Acquire and Develop Properties. The Company
has historically been successful at acquiring resorts in settings of
natural beauty at relatively low costs. The Company's acquisition strategy
is to identify underutilized or distressed properties in locations with
high tourist appeal and access to major metropolitan centers. Thereafter,
the Company's redevelopment efforts are primarily targeted at improving the
amenities and appointments of such properties. Recently, the Company has
successfully developed its prototype Varsity Clubs of America resort,
VCA-South Bend, and has commenced construction of VCA-Tucson. Future
Varsity Clubs will be designed and constructed in accordance with the
VCA-South Bend prototype, with appropriate modifications and improvements.
The Company believes that its acquisition and development strategies have
resulted in a portfolio of desirable properties with a relatively low cost
of sales margin. See "-- Growth Strategy" and Consolidated Financial
Statements.

Convenient Access Resorts. The Company's CARs are typically located
within a two-hour drive of an ILX Owner's principal residence, which
accommodates a demand for more frequent and convenient "short-stay"
vacations without the costs of airfare. This proximity also facilitates
marketing of the Company's Premiere Vacation Club, which permits members to
divide their Vacation Ownership Interest into shorter stays at any of the
Company's CARs included in the Premiere Vacation Club or exchange their
entire interest during any year through an exchange network. In addition to
the use of their Vacation Ownership Interest, ILX Owners are also entitled
to unlimited day-use of the offered amenities and discounted food, beverage
and other services at all ILX Resorts, thereby facilitating use and
enhancing the benefits of ownership by ILX Owners.

Standard Design, Lower Construction and Operating Costs of Varsity
Clubs. The Company's Varsity Clubs concept is based upon its VCA-South
Bend prototype. While each Varsity Club may have aspects uniquely tailored
to its targeted customer base, the Company believes that its standard
architectural and interior designs for Varsity Clubs will significantly
reduce associated development and construction costs. Standardization also
allows the Company to rapidly develop new Varsity Clubs and integrate new
resorts in response to demand. The Company anticipates that new Varsity
Clubs can be constructed within one year from acquisition of the underlying
real property.

Premium Locations. The Company believes that the variety and natural
beauty of the surroundings for its CARs enhance their attraction to
customers. Substantially all of the ILX Resorts are located in the Western
United States in part because of the numerous locations in that region
which are attractive to tourists and convenient to major metropolitan
areas. Substantially all of the Company's inventory of Vacation Ownership
Interests qualify as "red time," the highest demand classification for
purposes of participation in exchange networks such as RCI and II. The
Company intends to develop additional Varsity Clubs and Premiere Vacation
Club resorts in other Western United States sites which offer natural
settings or other attractions to entice tourists to visit such locations.

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Integrated In-House Operations. Substantially all of the Company's
marketing, sales, development, property management, financing and
collections operations are conducted internally, except certain minimal
marketing functions and those payment and collection activities related to
the financing by third parties of Customer Notes. In addition, the Company
operates all of the ILX Resorts on a centralized basis, with operating and
maintenance costs paid from ILX Owners' dues as well as hotel rental
revenues. The Company intends to integrate all aspects of its operations,
excluding those collection activities related to third-party financing,
into its in-house capabilities. The Company believes that its internal
capabilities result in greater control and consistency of all phases of its
operations and result in lower overall costs than generally associated with
outsourcing such operations. Integration also facilitates the Company's
Premiere Vacation Club and the ILX Resorts' qualification in the RCI and II
exchange networks, among others.

Directed Marketing. The Company's marketing strategy with respect to
its Premiere Vacation Club is to target potential customers who have a
demonstrated interest in the location of its ILX Resorts or a likelihood of
frequent travel. As opposed to traditional marketing strategies which often
emphasize telemarketing and direct mail activities focused on promotional
inducements unrelated to travel, the Company's marketing activities
primarily offer travel-related inducements (such as discounted or
complimentary vacations at nearby ILX Resorts). By offering travel-related
inducements, the Company believes it is better able to identify customers
who like to travel, which results in a higher percentage of sales per
contacts. In addition, the Company developed its proprietary Varsity Clubs
of America concept to capitalize upon affinity marketing strategies. The
Company believes that a high-quality "city club" experience combined with
the traditional benefits associated with Vacation Ownership Interests, such
as the opportunity to participate in exchange networks, will appeal to
consumers in the local markets of each Varsity Club. Further, the Varsity
Clubs concept is intended to take advantage of a marketing base of alumni,
sports enthusiasts, parents of students, corporate sponsors and others
affiliated with each university next to which a Varsity Club will be
developed. For example, alumni of the University of Arizona, to whom the
Company intends to market Vacation Ownership Interests at its VCA-Tucson,
currently number approximately 150,000, as of September 30, 1997. The
Company believes that these marketing strategies permit it to take
advantage of existing affinities, resulting in a higher rate of closings
per customer contacts.

PREMIERE VACATION CLUB

Commencing in 1998, the Premiere Vacation Club will offer purchasers deeded
membership interests that may be used in their entirety at one time or may be
divided into shorter stays at a variety of the Company's CARs or may be
exchanged through a participating exchange network. The Company's Premiere
Vacation Club emphasizes (i) CARs which facilitate short-stay vacations with
relatively low cost and time associated with travel to the ILX Resort, (ii)
located near settings of natural beauty, (iii) with high quality amenities and
resort services and (iv) which facilitate flexible use options. The Company
believes that its proprietary branded Premiere Vacation Club will capitalize
upon affinity marketing strategies and increase the goodwill associated with the
ILX Resorts. In addition, membership interests in the Premiere Vacation Club
will be marketed at an average higher gross sales price than sales of Vacation
Ownership Interests in a single ILX Resort, which the Company believes will
result in increased revenues. The Company intends to market membership interests
in its Premiere Vacation Club to ILX Owners as well as first-time buyers,
thereby expanding its sales volume without increasing its sales and marketing
costs in the same proportion as generally associated with sales to first-time
buyers.

Initially, the Company's Premiere Vacation Club inventory will consist of
Vacation Ownership Interests in the ILX Resorts and the Additional Interests.
Thereafter, new resorts will be added through the Company's aggressive pursuit
of selected acquisition opportunities. To this end, in December 1997, the
Company acquired an undivided interest in the common areas of and all of the
undeveloped and unsold portions of the Roundhouse Resort, an existing 59 unit
resort with five acres of developable land located in Pinetop/Lakeside, Arizona.
By marketing its inventory of Vacation Ownership Interests through the Premiere
Vacation Club, the Company believes it has greater flexibility with respect to
potential acquisition opportunities than generally

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associated with the sale of Vacation Ownership Interests in a single vacation
resort, to the extent that small or remote resorts which may be inefficient to
market as a single location resort may enhance the consumer appeal of a
membership interest in the Premiere Vacation Club. With its existing and planned
resorts in Arizona, the Company is seeking to build a critical mass of CARs
within driving distance of the Phoenix and Tucson metropolitan markets which
will support the initial introduction of the Premiere Vacation Club concept. The
Company believes that the geographic and cultural diversity of Arizona make that
state particularly appropriate for this expansion. Thereafter, the Company
intends to develop networks of CARs proximate to other major metropolitan areas
in the Western United States.

VARSITY CLUBS OF AMERICA

The Company intends to aggressively pursue the expansion of its proprietary
branded Varsity Clubs concept. The Company will focus on development of
additional Varsity Clubs near prominent colleges and universities in the Western
United States located in areas with a significant base of existing tourism and
access to major population centers. The Varsity Clubs of America concept is
primarily intended to offer residents in major population centers a "city club"
experience with day-use privileges regularly available, as well as the
opportunity to exchange their Vacation Ownership Interest through the exchange
networks in which ILX Owners participate. The Varsity Clubs concept also seeks
to maximize the appeal of such urban timeshare resorts by strategically locating
each of them proximate to one or more prominent colleges and universities with
nationally recognized athletic, cultural and other events. Large universities
host a variety of sporting, recreational, academic and cultural events that
create a substantial and relatively constant influx of participants, attendees
and spectators. The Varsity Clubs concept is designed to address the specific
needs of these individuals and entities by creating specialty vacation ownership
resorts that have a flexible ownership structure, enabling the purchase of
anything from a single day, a collection of single days (such as an entire
football or other sports' season) or a traditional one-week period. Each Varsity
Clubs facility will operate as a hotel to the extent of unsold or unused
vacation ownership inventory.

The prototype VCA-South Bend facility is an all-suite, 62 unit lodging
facility that features amenities such as The Stadium (a sports-theme atrium
lounge), a private Member's Lounge, exercise facilities, a swimming pool and
whirlpool spa, complete business services and other facilities popular with the
target market of likely purchasers. The prototype Varsity Clubs facility is
based on a four-acre configuration expandable to as many as 90 units, without
the need to acquire additional real property, and can be built in smaller
configurations if warranted by a particular market.

The first Varsity Clubs facility was completed in August 1995 and is
located approximately three miles from the University of Notre Dame and Notre
Dame Stadium in South Bend, Indiana, and approximately 90 miles from Chicago,
Illinois. Customers purchase deed and title to a floating period's use of a unit
and unlimited day-use privileges at the common areas of the property. Purchasers
may also receive the right to use the facility on specified dates, such as dates
of home football games, for which they pay a premium. A total of 62 units, or
3,224 one-week intervals, have been constructed at VCA-South Bend and, at
September 30, 1997, approximately 1,819 one-week intervals were available for
sale. ILX anticipates expanding the facility in 1998 by constructing an
additional 24 suites, thus adding 1,248 one-week intervals. To ILX's knowledge,
no other vacation ownership resorts exist proximate to the University of Notre
Dame. To date, VCA-South Bend has been able to compete favorably for commercial
guests because of its superior facilities and amenities relative to other
lodging accommodations in the area.

The site for the second Varsity Clubs facility is located in Tucson,
Arizona, less than three miles from the University of Arizona. This second
Varsity Club will be completed in the first quarter of 1998 and will offer 62
suites, or 3,224 one-week intervals. VCA-Tucson was designed in accordance with
the VCA-South Bend prototype, with certain modifications made to improve
efficiency and incorporate local design themes. The Company chose Tucson as a
site for its Varsity Clubs concept because of its status as a year-round
destination location, a large residential population base of approximately
750,000, and the proximity to the University of Arizona, which has an alumni
base in excess of 150,000 people as of September 30, 1997. The Company believes
that all of these factors increase the appeal of VCA-Tucson to prospective
buyers as well as providing increased trading power for purchasers of Vacation
Ownership Interests in the resort for purposes of

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participation in exchange networks. Construction of the Tucson resort commenced
in late 1997 and the facility is expected to open in the first quarter of 1998.

The Company is considering various other sites for development of
additional Varsity Clubs facilities in the next five to seven years. Management
believes there exist numerous sites in the Western United States that are
attractive for the development of additional Varsity Clubs. The Company intends
to expand its Varsity Clubs concept to at least five of these areas over the
next three years, based upon the VCA-South Bend prototype, with certain
modifications and improvements. The Company also believes that Varsity Clubs
will establish their own brand name recognition as additional facilities are
offered, each with a consistent design and selection of amenities. Varsity Clubs
expansion efforts will initially be primarily focused on metropolitan areas in
the Western United States, each located near one or more large universities, but
the Company will assess other potential opportunities as they arise. Ideally,
the Company will seek to place additional Varsity Clubs near universities that
are located in or convenient to popular tourist destination locations in or near
large metropolitan areas, such as Tempe, Arizona; Boulder, Colorado; Las Vegas,
Nevada; Palo Alto, California and Seattle, Washington. The Company will also
seek to broaden the affinity marketing base of its future Varsity Clubs by
situating them proximate to more than one prominent college or university, where
appropriate. The Varsity Clubs concept also seeks to capitalize on affinity
marketing strategies through the perceived affiliation with a nationally
recognized university and the "city club" experience which the Company seeks to
associate with the Varsity Clubs of America brand name. The Company intends to
provide purchasers of Vacation Ownership Interests in one Varsity Club certain
benefits at other Varsity Clubs in order to enhance their appeal to consumers.

SALES AND MARKETING

Marketing is the process by which the Company attracts potential customers
to visit and tour an ILX Resort or attend a sales presentation. Sales is the
process by which the Company seeks to sell a Vacation Ownership Interest to a
potential customer once he or she arrives for a tour at an ILX Resort or attends
a sales presentation. The Company believes it has the marketing and sales
infrastructure necessary to sell Vacation Ownership Interests on a competitive
basis. All of the Company's sales and substantially all of the Company's
marketing functions are currently performed in-house and the Company invests
significant resources attracting, training and seeking to retain its sales and
marketing employees. The Company intends to incorporate more of its marketing
operations into its in-house capabilities. The Company believes this strategy
provides it with greater control over these critical functions, resulting in
greater consistency of customer relations and improved customer satisfaction. In
addition, management believes that its practice of hiring employees to staff its
sales and marketing functions, as opposed to using independent contractors as
has been the industry norm, results in a higher retention rate among its sales
force and provides a pool of experienced staff from which to draw upon as the
Company's business expands. The Company expends substantial resources
identifying, attracting and training its sales and marketing personnel and
offers a full package of employment benefits to its sales and marketing
personnel. Management believes that consistency and high quality in its sales
and marketing operations is crucial to its success. The Company believes that
the package of benefits offered to its sales and marketing employees is uncommon
in the vacation ownership industry and, as a result, attracts high quality
personnel and provides an incentive for their performance.

Marketing. The Company's marketing activities are devoted primarily
towards (i) hotel guests at the ILX Resorts, (ii) RCI and II exchange program
participants staying at the ILX Resorts, (iii) off-premise contacts with
visitors to the local surroundings of the ILX Resorts and in the metropolitan
areas within driving distances of the ILX Resorts and (iv) direct mail and
telemarketing to residents of metropolitan areas within driving distance of the
ILX Resorts. The Company's marketing strategy seeks to target prospective buyers
who respond favorably to travel-related inducements because the Company believes
such consumers are more likely to travel and therefore have a greater likelihood
of purchasing a Vacation Ownership Interest. The Company identifies potential
purchasers through internally developed marketing techniques, and sells Vacation
Ownership Interests through its four sales offices located at or near ILX
Resorts. The Company primarily targets customers who live within driving
distance of an ILX Resort or who are vacationing at or near a ILX Resort. This
practice allows the Company to invite potential purchasers to experience the ILX

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Resorts and avoid the more expensive marketing costs of subsidized airfare and
lodging which are typically associated with the vacation ownership industry. In
addition, the Company believes that its marketing strategy results in a higher
percentage of sales per prospective customer contacts as compared to many of its
competitors because its targeted customer base has a demonstrated interest in
the locale of an ILX Resort and/or a greater likelihood to take vacations.

Similar to branding techniques utilized by some of its competitors, the
Company also seeks to capitalize upon affinity marketing concepts in attracting
prospective buyers to its Varsity Clubs concept by seeking to develop a branded
"city club" experience for flexible use by local residents. In addition,
marketing of Varsity Clubs seeks to focus upon alumni, parents of university
students and other persons or entities who have a pre-existing affiliation with
or other attraction to the local university. All of the Company's marketing
activities emphasize the convenience of the ILX Resorts coupled with the
opportunity to participate in exchange networks as well as the quality and
breadth of amenities available at each of the ILX Resorts.

Sales. The Company actively sells its inventory of Vacation Ownership
Interests primarily through a sales staff of approximately 140 employees,
including approximately 100 sales agents at four sales offices, each located at
or near selected ILX Resorts. Prospective first-time purchasers participate in a
tour of the facilities as well as its related amenities, guided by a
salesperson. At the conclusion of the tour, the terms of making a purchase,
including financing alternatives, are explained to the customer. Approximately
20% to 25% of the Company's sales have historically been made on a cash basis.
However, for those customers seeking financing, the Company conducts substantial
credit pre-approval research. The Company's point-of-sale credit pre-approval
process typically includes a review of the customer's credit history. After
final approval of a purchase, which includes verification of employment, the
Company waits until expiration of the applicable statutory waiting period,
generally from three to seven days, prior to recognizing a sale as complete.

In addition to generating sales to first-time buyers, the Company's sales
force seeks to generate sales of additional Vacation Ownership Interests or
Upgrades to ILX Owners. Sales to ILX Owners generally have lower marketing costs
associated with them as these buyers tend to be more familiar with the nature of
purchasing a Vacation Ownership Interest and the amenities offered by the ILX
Resorts. As a result of an increased emphasis upon sales to these buyers, sales
to ILX Owners accounted for 12.4% of Vacation Ownership Interest sales by the
Company during the nine months ended September 30, 1997. During 1995 and 1996,
sales to ILX Owners accounted for less than 5.9% of the Company's total sales.
The Company intends to increase its sales efforts with respect to ILX Owners.

The Company's inventory of Vacation Ownership Interests has historically
consisted of a one-week interval which may be used on an annual or an
alternate-year basis in a specified ILX Resort during a specified range of
dates. ILX Owners may also participate in exchange networks such as RCI and II.
However, commencing in 1998, the Company will offer deeded membership interests
in its Premiere Vacation Club, which permit a member to stay at one or more of
the participating ILX Resorts for up to one week on an annual or alternate-year
basis. A member may divide their stays into shorter vacations at any time
between a specified period of time. The Company believes that the variety and
flexibility of use options associated with its inventory of Vacation Ownership
Interests are uniquely attractive to customers.

CUSTOMER FINANCING

The Company currently provides financing for approximately 75% to 80% of
its Vacation Ownership Interest sales. On financed sales, the Company receives
at least 10% of the aggregate sales price of Vacation Ownership Interest as a
down payment. Financing for the remainder is typically made available for a term
of seven years at a rate of 14% to 15% per annum. At September 30, 1997, the
Company had a portfolio of retained Customer Notes totaling $14.8 million in
principal amount.

The Company believes that providing available financing is essential to the
successful sales and marketing of its Vacation Ownership Interest inventory.
However, the Company seeks to minimize the risks associated with its financing
activities by emphasizing the credit pre-approval process. Management believes
that its efforts in this area are more extensive than those typically engaged in
by some of its competitors. In addition, the Company expends significant
resources negotiating alternative repayment programs for past due accounts,

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so as to minimize its actual losses. Collection activities with respect to
Customer Notes which the Company has hypothecated are managed internally and
serviced by a third-party on behalf of the lenders and the Company. In addition,
the Company occasionally utilizes third party collection agencies for difficult
accounts. Historically, these have represented only a minimal percentage of the
Customer Notes.

Prior to 1995, the Company sold the majority of its Customer Notes and
retained the small remaining portion, most of which were hypothecated. Since
1995, the Company has increased the amount of Customer Notes which it retains,
most of which it hypothecates, and, as a result, at September 30, 1997, the
Company retained Customer Notes in an aggregate principal amount of $14.8
million as compared to $7.9 million at December 31, 1995. Because the Company
has historically financed its operations through the sale of a substantial
majority of its Customer Notes, the Company's net income from customer financing
transactions (i.e., the spread between the interest charged to customers and the
Company's borrowing costs) has been limited. However, although there can be no
assurance in this regard, the Company believes that the closing of this Offering
and the reduction of its current indebtedness will allow the Company to arrange
more favorable receivable financing, which will in turn enable the Company to
retain a significantly greater percentage of its Customer Notes, thereby
increasing the net income attributable to favorable interest rate differences.
At September 30, 1997, $3.2 million in principal, or 8.3%, of the retained
Customer Notes and the Customer Notes which have been previously sold with
recourse to the Company were over 90 days past due. The Company intends to seek
to negotiate more favorable terms for its Customer Notes credit facilities
following this Offering. However, the Company does not currently have any
agreements regarding renegotiated or additional credit facilities and there can
be no assurance that the Company will be successful in this regard. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

Although the terms of each Customer Note vary, typically such notes are
deemed past due when a scheduled payment is 30 days or more past due. In
addition, a delinquency occurs when an account becomes more than 90 days past
due. The Company seeks to avoid defaults by working closely with the lender or
its collection agent with respect to ILX Owners who become delinquent. The first
collection contact typically occurs within 16 to 30 days of a payment's due
date.

The Company has agreements with financial institutions for total
commitments of $20 million under which the Company may sell certain of its
customer notes receivables. These agreements provide for sales on a recourse
basis with a percentage of the amount sold held back by the respective financial
institution as additional collateral. Customer notes receivables may be sold at
discounts or premiums to the principal amount in order to yield the consumer
market, as defined by such financial institution. At September 30, 1997, $8.0
million was available to the Company under these commitments. The Company also
has financing commitments in the aggregate amount of $14.2 million, pursuant to
which the Company may hypothecate Customer Notes which are pledged to the lender
as collateral. These borrowings bear interest at rates from prime plus 3.25% to
prime plus 5% and expire at various dates from 1998 through 2003. At September
30, 1997, $8.1 million was available to the Company under these commitments. The
Company currently reserves approximately 3% of gross sales (including cash
sales) as an allowance for doubtful accounts. This reserve represents a
percentage decrease since the Company's inception based upon the Company's
actual collections experience. At December 31, 1995 and 1996 and September 30,
1997, the aggregate amount of these reserves were $2.4 million, $2.6 million and
$3.0 million, respectively. During 1995, 1996 and the nine months ended
September 30, 1997, the Company's provision for doubtful accounts exceeded
actual write-offs by $1.1 million, $0.2 million and $0.5 million, respectively.
To the extent that the Company's losses as a result of bad debt exceed its
corresponding reserves, its financial condition and results of operations may be
materially adversely affected. See "Risk Factors -- Financing Customer
Borrowings; Liquidity Risks."

OTHER OPERATIONS

Resort Operations. The Company also receives revenues from (i) the rental
of its unsold or unused inventory of units at the ILX Resorts, (ii) the sale of
food, beverages and other amenities at such resorts and (iii) the management and
operation of the ILX Resorts. During 1996, the Company received $11.1 million in
net revenues from these operations, consisting of $5.8 million in room rental
revenue, $3.9 million in food and

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beverage revenue and $1.4 million in other revenue. Of these amounts, Los
Abrigados contributed $8.0 million, or 72.1% of the Company's total resort
operations revenues in 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Historically, the Company's resort operation activities have not generated
a material portion of the Company's net profits on a consolidated business.
Revenues from resort operations typically vary significantly from one ILX Resort
to another. In addition, changes in revenue received from these operations have
not typically correlated with fluctuations in the Company's revenues from sales
of Vacation Ownership Interests. Management expects this trend to continue in
the future in part because of the emphasis of the Company's growth strategy on
its Varsity Clubs, which have typically generated a lower percentage of revenues
from resort operations than that generated by the Company's CARs. However, the
Company believes that its resort management activities directly complement the
Company's efforts with respect to the marketing and sales of Vacation Ownership
Interests.

Red Rock Collection. The Company's operations also include the sale of
personal care products through its wholly-owned subsidiary Sedona Worldwide
Incorporated. The Company's personal care products have been marketed under its
proprietary Red Rock Collection brand name through the ILX Resorts. Commencing
in 1998, these products will be marketed under the brand name "Sedona Spa" and,
in connection with such change, certain modifications to the product line will
be implemented. This resort-based sales program includes an upscale line of
personal care amenities, in-room gift basket promotions and retail product sales
at the ILX Resorts. Red Rock Collection products are primarily used by the
Company as promotion incentives to potential purchasers who attend the Company's
sales tours and presentations. The Company then uses direct mail to market Red
Rock Collection products to resort customers and tour participants who have
previously used the products. Sales of Red Rock Collection products are included
in "Sales of Land and Other" on the Company's financial statements and, to date,
have not resulted in a material amount of net revenues or profits to the
Company. The Company has not in the past and does not intend in the future to
devote a significant portion of its resources to sales of Red Rock Collection
products.

Land Sales. Since 1993, the Company has also received revenues from the
sale of primarily unimproved real property. These operations originated as a
result of the Company's opportunistic acquisition of its wholly owned
subsidiary, Genesis, in November 1993. The sale of real property is not a core
business function for the Company and, as such, the Company has not historically
and does not intend in the future to devote a material portion of its resources
to these operations. Typically, the Company has sold these assets as subdivided
lots or large unimproved parcels. The Company intends to sell substantially all
of these assets during 1998, although there can be no assurance that it will be
able to sell these assets at attractive prices, if at all, during this year.
Following the sale of these assets, management does not expect the sale of real
property to be material to its results of operations.

PARTICIPATION IN EXCHANGE NETWORKS

The Company believes that consumers are more likely to purchase from its
inventory of Vacation Ownership Interests as a result of the Company's
participation in the Vacation Ownership Interest exchange networks operated by
RCI and II, the leading exchange network operators. In a 1995 study sponsored by
the Alliance for Timeshare Excellence and ARDA, exchange opportunity was cited
by purchasers of interval interests as one of the most significant factors in
their decision to purchase an interest. Membership in RCI or II allows ILX
Owners to exchange in a particular year their occupancy right in the unit in
which they own a Vacation Ownership Interest for an occupancy right at the same
time or a different time in another participating resort, based upon
availability and the payment of a variable exchange fee. A participating ILX
Owner may exchange his or her Vacation Ownership Interest for an occupancy right
in another participating resort by listing the Vacation Ownership Interest as
available with the exchange network operator and by requesting occupancy at
another participating resort, indicating the particular resort or geographic
area to which the owner desires to travel, the size of the unit desired and the
period during which occupancy is desired. The exchange network assigns a rating
to each listed Vacation Ownership Interest, based upon a number of factors,
including the location and size of the unit, the quality of the resort and the
period of the year during which the Vacation Ownership Interest is available,
and attempts to satisfy the exchange request

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by providing an occupancy right in another Vacation Ownership Interest with a
similar rating. Approximately 85% of the Vacation Ownership Interests at the ILX
Resorts qualify as "red time," the highest demand classification, thereby
increasing the exchange opportunities available to ILX Owners. If RCI or II is
unable to meet the member's initial request, the network operator may suggest
alternative resorts, based on availability. In addition, ILX's Owner Services
Department has established arrangements with additional resorts and smaller
exchange networks through which it offers exchange opportunities and discounted
vacation getaways to ILX Owners. The Company believes that its direct
participation in the exchange process, coupled with these additional services,
provides ILX with a competitive advantage and tend to increase customer
satisfaction. See "-- Operating Strategies" above.

COMPETITION

ILX's Vacation Ownership Interest plans compete both with other Vacation
Ownership Interest plans as well as hotels, motels, condominium developments and
second homes. ILX considers the direct competitors of individual resorts to also
include alternative accommodations, including hotels, motels, bed-and-breakfasts
and small vacation ownership operators located within the immediate geographic
vicinity of such resort. This is particularly true with respect to its CARs that
tend to attract purchasers whose decision to buy a Vacation Ownership Interest
is likely to be influenced by the convenience of the resort to their principal
residence.

The Vacation Ownership Interest industry historically has been highly
fragmented and dominated by a very large number of local and regional resort
developers and operators, each with limited portfolios. More recently, many of
the world's most widely-recognized lodging, hospitality and entertainment
companies have begun to develop and sell vacation ownership interests under
their brand names, including Marriott Ownership Resorts, Walt Disney Company,
Hilton Hotels Corporation, Hyatt Corporation, Four Seasons Hotels & Resorts and
Promus Hotel Corporation. In addition, other publicly-traded companies such as
Signature Resorts, Inc., Fairfield Communities, Inc., Silverleaf Resorts, Inc.,
Trendwest Resorts, Inc. and Vistana, Inc. currently compete or may compete in
the future with the Company. Furthermore, significant competition exists in
other markets in which the Company currently operates or is developing vacation
ownership resorts. Many entities with which the Company competes have
significantly greater access to financial, sales and marketing and other
resources than those of the Company and may be able to grow at a more rapid rate
or more profitably as a result. Management anticipates competition to increase
in the future as a result of consolidation in the vacation ownership industry.
There can be no assurance that the Company will be able to successfully compete
with such companies. See "Risk Factors -- Competition."

GOVERNMENTAL REGULATION

General. The Company's marketing and sales activities and other resort
operations are subject to extensive regulation by the federal government and the
states in which the Company's resorts are located and in which its interval
interests are marketed and sold. Federal legislation to which the Company is or
may be subject includes the Federal Trade Commission Act, the Fair Housing Act,
the Truth-in-Lending Act, the Real Estate Settlement Procedures Act, the Equal
Credit Opportunity Act, the Interstate Land Sales Full Disclosure Act, the
Telemarketing and Consumer Fraud and Abuse Prevention Act and the Civil Rights
Acts of 1964, 1968 and 1991. Many states have adopted legislation as well as
specific laws and regulations regarding the sale of vacation ownership
interests. The laws of most states, including Arizona, require a designated
state authority to approve a detailed offering statement describing the Company
and all material aspects of the resort and sale of vacation ownership interests
at such resort. In addition, the laws of most states in which the Company sells
interests grant the purchaser of a vacation ownership interest the right to
rescind a contract of purchase at any time within a statutory rescission period.
Furthermore, most states have other laws which regulate the Company's
activities, such as real estate licensure laws, travel sales licensure laws,
anti-fraud laws, telemarketing laws, prize, gift and sweepstakes laws, and labor
laws. The Company believes that it is in material compliance with all applicable
federal, state, local and foreign laws and regulations to which it is currently
subject. See "Risk Factors -- Regulation of Marketing and Sales of Vacation
Ownership Interests and Related Laws."

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Environmental Matters. Under applicable federal, state and local
environmental laws and regulations, a current or previous owner or operator of
real estate may be required to investigate, remediate and remove hazardous or
toxic substances at such property, and may be held liable for property damage
and for investigation, remediation and removal costs incurred by such parties in
connection with the contamination. Such laws typically impose such liability
without regard to whether the owner or operator knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. The costs associated with compliance
with such regulations may be substantial, and the presence of such substances,
or the failure to properly remediate the contamination on such property, may
adversely affect the owner's or operator's ability to sell or rent such property
or to borrow against such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances at a disposal or
treatment facility also may be liable for the costs of removal or remediation of
a release of hazardous or toxic substances at such disposal or treatment
facility, whether or not such facility is owned or operated by such person. In
addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the
contamination. Finally, the owner or operator of a site may be subject to common
law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. In connection with its
ownership and operation of its properties, the Company may be potentially liable
for such costs.

The Company does not always conduct Phase I environmental assessments at
the ILX Resorts, properties under development and properties subject to
acquisition. Because many of the Company's resorts are typically found in remote
locations, it does not consider the risks of environmental liabilities
significant enough to warrant the performance of Phase I assessments at such
locations. Failure to obtain such reports may result in the Company acquiring or
developing unusable property or assuming certain liabilities which could have
been avoided if the Company had the information typically discovered in a Phase
I report. However, when appropriate, the Company has in the past and will in the
future obtain Phase I reports. To date, the Company has obtained environmental
reports with respect to three of the ILX Resorts. In addition, the Company does
conduct significant in-house due diligence prior to the acquisition of any real
property interests. To date, the Company's investigation of its properties have
not revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's business, assets, financial condition
or results of operations, nor is the Company aware of any such material
environmental liability. See "Risk Factors -- Possible Environmental
Liabilities."

The Company believes that its properties are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances. The Company has not been notified by
any governmental authority or any third party, and is not otherwise aware, of
any material noncompliance, liability or claim relating to hazardous or toxic
substances or petroleum products in connection with any of its present
properties.

Other Regulations. Under various state and federal laws governing housing
and places of public accommodation, the Company is required to meet certain
requirements related to access and use by disabled persons. Although management
believes that the Company's resorts are substantially in compliance with present
requirements of such laws, the Company may incur additional costs of compliance
in connection with the development of new resorts, or conversion or renovation
of ILX Resorts. Additional legislation may impose additional requirements on
owners with respect to access by disabled persons. The aggregate costs
associated with compliance with such regulations are not currently known, and,
while such costs are not expected to have a material effect on the Company, such
costs could be substantial. Limitations or restrictions on the completion of
certain renovations may limit application of the Company's growth strategy in
certain instances or reduce profit margins on the Company's operations.

EMPLOYEES

As of September 30, 1997, the Company had approximately 760 employees, of
which approximately 525 were employed on a full-time basis (including
approximately 120 employed on a full-time equivalent basis of

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28 hours per week). The Company believes relations with its employees are good
and none of its employees are represented by labor unions.

INSURANCE

The Company carries comprehensive liability, business interruption, title,
fire and storm insurance with respect to the ILX Resorts, with policy
specifications, insured limits and deductibles customarily carried for similar
properties which the Company believes are adequate. There are, however, certain
types of losses (such as losses caused by floods or acts of war) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits occur,
the Company could lose its capital invested in a resort, as well as the
anticipated future revenues from such resort and would continue to be obligated
on any mortgage indebtedness or other obligations related to the property. Any
such loss could have a material adverse effect on the Company. See "Risk
Factors -- Natural Disasters; Uninsured Loss."

LEGAL PROCEEDINGS

Although the Company may be subject to litigation from time to time in the
ordinary course of its business, it is not a party to any pending or threatened
legal proceedings that it believes will have a material impact on its business.

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MANAGEMENT

The following table sets forth certain information concerning the Company's
executive officers, directors and certain key employees. Except as otherwise
noted, none of the executive officers are directors or officers of any other
publicly owned corporation or entity.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Joseph P. Martori.................. 56 Chairman of the Board and Chief Executive Officer
Nancy J. Stone..................... 40 President, Chief Operating Officer and Director
Edward S. Zielinski................ 46 Executive Vice President, President and Chief
Operating Officer of Varsity Clubs of America
Incorporated and Director
Jay R. Hoffman..................... 43 Senior Vice President and Chief Financial Officer
John P. Brooks..................... 52 Senior Vice President, Sales and Marketing
George C. Wallach.................. 61 Senior Vice President and General Counsel
Steven R. Chanen................... 44 Director
Thomas J. Hamel.................... 39 Director
Patrick J. McGroder III............ 52 Director
James W. Myers..................... 63 Director
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS

JOSEPH P. MARTORI has served as a director of the Company since its
inception and as Chairman of the Board since 1991. Mr. Martori served as
President from November 1993 through 1995 and has served as Chief Executive
Officer since 1994. Prior thereto, Mr. Martori was engaged in the private
practice of law since 1967 with the New York City law firm of Sullivan &
Cromwell; the Phoenix law firms of Snell & Wilmer; Martori, Meyer, Hendricks &
Victor, P.A. (of which he was a founding member); and Brown & Bain, P.A. (of
which he was the Chairman of the Corporate, Real Estate and Banking Department).
Mr. Martori was a founder of Firstar Metropolitan Bank & Trust in Phoenix and
has served on its Board of Directors since 1983. Mr. Martori is also Chairman of
the Board of MEI, an investment company which holds 36.0% of the Company's
outstanding Common Stock ( % after the closing of this Offering, % if the
Underwriters' over-allotment option is exercised in full). Mr. Martori is also a
member of the Board of Trustees of The Lawyers' Committee for Civil Rights under
Law. Mr. Martori received a B.S. degree, summa cum laude, and an M.B.A. degree
in finance from New York University and a J.D. degree, cum laude, from the
University of Notre Dame Law School.

NANCY J. STONE has served as a Director of the Company since April 1989,
and as President and Chief Operating Officer since January 1996. Ms. Stone
served as Chief Financial Officer of the Company from July 1993 to December 29,
1997, as well as from January 1990 to April 1992, and as Executive Vice
President from July 1993 to December 1995. Ms. Stone served on the faculty of
North Central College, Naperville, Illinois from 1992 to 1993. Ms. Stone also
served as Vice President of Finance and Secretary of the Company from April 1987
to December 1989. Ms. Stone is a Certified Public Accountant in the States of
Arizona and Illinois. Ms. Stone received a B.A. degree in accounting and finance
from Michigan State University magna cum laude, and an M.B.A. degree from
Arizona State University summa cum laude.

EDWARD S. ZIELINSKI has served as a Director and Executive Vice President
of the Company since January 1996, and as President and Chief Executive Officer
of Varsity Clubs of America Incorporated since July 1997. Mr. Zielinski served
as Senior Vice President of the Company from January 1994 to December 1995 and
as General Manager of Los Abrigados Resort & Spa from December 1992 until
January 1994, and in various other executive positions with the Company since
November 1988. Mr. Zielinski has twenty years of resort management and marketing
experience in both the domestic and international markets. Prior to joining the
Company, Mr. Zielinski served as General Manager of Oceania Resorts, Ltd., a New
Zealand-Australian company, from August 1985 through October 1988 based in
Auckland, New Zealand. Prior thereto, Mr. Zielinski held senior management
positions with Hyatt International Hotels and Continental Airlines Hotel
Division.

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JAY R. HOFFMAN became Senior Vice President and Chief Financial Officer of
the Company on December 29, 1997. Prior thereto, Mr. Hoffman served as Chief
Financial Officer of Homeplex Mortgage Investments Corporation (now Monterey
Homes Corporation), a mortgage company in Phoenix, Arizona from 1988 to 1997; as
Senior Audit Manager with Kenneth Leventhal & Company (now Ernst & Young) in
Phoenix, Arizona from 1987 to 1988; and with Arthur Andersen L.L.P. in Kansas
City, Missouri and Phoenix, Arizona from 1976 to 1987. Mr. Hoffman is a
Certified Public Accountant in the States of Arizona and Missouri. Mr. Hoffman
received a B.B.A. degree from the University of Missouri.

JOHN P. BROOKS has served as Senior Vice President, Sales and Marketing, of
the Company since October 1997. Mr. Brooks has also served as Senior Vice
President and General Sales Manager of the Sedona Vacation Club at Los Abrigados
since October 1997 and served as Vice President and Director of Operations at
Los Abrigados from 1994 to October 1997. Mr. Brooks has served in various sales
management positions for the Company since March 1989. Mr. Brooks served in
similar positions with Arroyo Robles Resort in Sedona, Arizona and Fairfield
Resort in Flagstaff, Arizona prior to joining the Company. Mr. Brooks co-owned
and managed Century 21 Plaza II Realty in Phoenix, Arizona from 1977 to 1986.
Mr. Brooks is a licensed real estate broker and received a B.S. degree in
marketing and management from Arizona State University.

GEORGE C. WALLACH has served as General Counsel since May 1997 and as
Senior Vice President of the Company since January 1996. He joined the Company
in 1995 and served as Executive Vice President from February to December 1995
and resident Project Director for Kohl's Ranch Lodge from June 1995 to May 1997.
Prior to joining the Company, Mr. Wallach was a partner in the Phoenix, Arizona
law firm of Brown & Bain, P.A. from 1986 to 1995, specializing in real estate
and business law. Mr. Wallach currently serves on the Board of Directors of The
University of Arizona Law College Association (past President) and the Board of
Directors of The University of Arizona Alumni Association. Mr. Wallach received
B.A. and M.A. degrees from the University of Arizona. Mr. Wallach earned a J.D.
degree at the University of Arizona "with distinction."

STEVEN R. CHANEN has served as a Director of the Company since July 1995.
Mr. Chanen has served as President and Chief Operating Officer of Chanen
Construction Company, Inc., Phoenix, Arizona, since 1989, as Chairman of the
Board of Media Technology Capital Corporation (doing business as S.R. Chanen &
Co., Inc.) since 1986, and as President of United Property Investments
Corporation, a subsidiary of United Properties, Ltd. of Vancouver, Canada since
1987. Prior thereto, Mr. Chanen served as Vice President of FMR Capital
Corporation from 1981 to 1986 and as a shareholder and director of Wentworth and
Lundin law firm from 1980 to 1986. Mr. Chanen received B.S. and J.D. degrees
from Arizona State University.

THOMAS J. HAMEL has served as a Director of the Company since December
1997. Mr. Hamel serves as President and Chief Operating Officer of Resort
Funding, Inc., a vacation ownership finance company in Syracuse, New York. Mr.
Hamel has been with Resort Funding, Inc. since 1986 and has substantial
experience with the Company and within the vacation ownership industry in
general. Mr. Hamel also serves as a director of Equivest Finance Company, a
publicly held corporation, and is a member of the finance and property
management committees of the American Resort Development Association, the
vacation ownership industry's primary trade association. Mr. Hamel received a
B.S. degree in business finance from LeMoyne College, Syracuse, New York.

PATRICK J. MCGRODER III has served as a Director of the Company since June
1997. Mr. McGroder has been a trial lawyer engaged in the practice of law since
1970, and has served since 1990 as a member of the law firm of Goldstein &
McGroder, Ltd. of Phoenix, Arizona (which he co-founded). Mr. McGroder received
a B.A. degree from the University of Notre Dame and a J.D. degree from the
University of Arizona School of Law.

JAMES W. MYERS has served as a Director of the Company since July 1995. Mr.
Myers has served as President of Myers Management and Capital Group, Inc., a
management consulting firm he founded, since December 1995. From 1986 to 1995,
Mr. Myers was President and Chief Executive Officer of Myers Craig Vallone
Francois, Inc., an investment banking and management advisory firm he also
founded. Prior thereto, Mr. Myers held executive positions with a variety of
public and private companies from 1956 to 1986. Mr. Myers also serves as a
director of Chambers Belt, Inc., China Mist Tea, Landiscor, Inc., Solar Cells,
Inc.

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and Nanomics, Inc. Mr. Myers received a B.S. degree from Northwestern University
and an M.B.A. degree from the University of Chicago.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee. The Board of Directors has established an audit committee
(the "Audit Committee"), which consists of Messrs. Myers and McGroder. The Audit
Committee is responsible for recommending independent auditors, reviewing with
the independent auditors the scope and results of the audit engagement,
establishing and monitoring the Company's financial policies and control
procedures, and reviewing and monitoring the provision of non-audit services by
the Company's auditors.

Compensation Committee. The Board of Directors has established a
compensation committee (the "Compensation Committee"), which consists of Messrs.
Myers and McGroder. The Compensation Committee reviews, determines and
establishes salaries, bonuses and other compensation, including stock options
and awards, for the Company's executive officers.

Executive Committee. The Board of Directors has also established an
Executive Committee consisting of Ms. Stone and Messrs. Martori, Myers and
Zielinski. The Executive Committee meets on a monthly basis and has authority to
take certain limited actions on behalf of the Board of Directors concerning the
Company's ongoing operations.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Martori and Ms. Stone served on the Compensation Committee of the Board
of Directors until November 1997. Each of Ms. Stone and Mr. Martori also served
as an executive officer of the Company during that same period. In November
1997, the Compensation Committee was changed to consist solely of non-employee
directors.

Effective as of January 1, 1998, the Company entered into four year
employment agreements with each of Mr. Martori and Ms. Stone. These agreements
provide for an annual base salary of $200,000 for Mr. Martori and $150,000 for
Ms. Stone. In addition, Ms. Stone is to receive an award of 15,000 restricted
shares of Common Stock on January 1st of each year during the term of the
agreement commencing January 1, 1998, provided Ms. Stone is employed by the
Company on the date of grant. See "-- Employment Agreements" and "Certain
Relationships and Related Transactions."

Mr. Martori is the Chairman of the Board of MEI, a holder of 36.0% of the
Company's outstanding Common Stock ( % on the Closing of this Offering, % if
the Underwriters' over-allotment option is exercised in full).

In August 1992, LAP issued to MEI, as agent for EJM, MEI, Arthur J. Martori
and Alan R. Mishkin ("Mishkin"), a $770,000 promissory note bearing interest at
14%, collateralized by $810,630 in notes receivable. The promissory note was
issued to reduce Class A limited partners' capital contributions by $500,000,
Class A priority returns by $149,954, Class B accrued interest by $73,772 and
certain loan guarantee fees by $46,274. Principal payments of $52,181 and
interest payments of $13,548 were made during 1997.

In December 1995, LAP issued 10% promissory notes to EJM and Joseph P.
Martori, a trustee for Cynthia J. Polich (not an affiliate of the Company)
("Polich"), in the original principal amounts of $550,000 and $350,000. In 1997,
36,800 shares of the Company's Common Stock were issued in satisfaction of the
remaining $230,000 principal amount of the note payable to EJM. The note payable
for the benefit of Polich matures on December 31, 1999, is secured by 122
Vacation Ownership Interests in Kohl's Ranch and is convertible into Common
Stock at a price of $7.50 per share. In 1997, LAP paid $68,792 in principal and
interest on the note payable for the benefit of Polich and $17,203 in interest
on the note payable to EJM.

In January 1996, the Company paid to MEI $60,000 cash and issued a
promissory note in the principal amount of $100,000 as satisfaction for $173,225
of unpaid guarantee fees and $44,073 in holdbacks previously payable by LAP to
MEI. The note was repaid in full in January 1997. See Notes 10 and 15 to the
Company's Consolidated Financial Statements.

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<PAGE> 74

In August 1997, the Company acquired the Class B Limited Partnership
Interests in LAP from MEI and Mishkin for (i) $820,000 cash, (ii) the issuance
of 20,000 shares of Common Stock, with a value of $125,000 at the time of
issuance, and (iii) the issuance of 8% promissory notes in the original
principal amounts of $1.3 million payable to MEI and $675,000 payable to
Mishkin. Both of these notes mature in 2002, and their repayment is secured by
interests in LAP. The Company paid $100,000 in principal payments to MEI
pursuant to the note in 1998.

During 1997, LAP made a capital distribution of $140,000 to MEI, a Class B
Limited Partner at the time of distribution. See "Certain Relationships and
Related Transactions."

INDEMNIFICATION AND LIMITATION OF LIABILITY

The Company's Articles of Incorporation and Bylaws contain certain
provisions which require the Company to indemnify its officers, directors,
employees and agents against certain liabilities and expenses incurred in
connection with their acting in such capacity. See "Description of ILX
Securities and Pertinent Arizona Statutes -- Certain Charter and By-Law
Provisions."

COMPENSATION OF EXECUTIVE OFFICERS

The following table shows, for each of the fiscal years ended December 31,
1997, 1996, and 1995, the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to each of the
Company's Chief Executive Officer and other most highly compensated executive
officers (collectively, the "Named Executive Officers") receiving compensation
in excess of $100,000 in all capacities in which they served during the last
completed fiscal year.

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<PAGE> 75

SUMMARY COMPENSATION

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------------- ----------------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND TITLE YEAR SALARY BONUS COMPENSATION(2) AWARDS OPTIONS/SARS COMPENSATION
- -------------------------- ---- -------- -------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph P. Martori(1)...... 1997 $149,606 $ 50,000 -- -- -- --
Chairman and Chief 1996 136,500 20,000 -- -- --
Executive Officer 1995 204,877 -- -- -- -- --
Nancy J. Stone(1)......... 1997 129,659 102,896(3) -- -- -- --
President and Chief 1996 115,193 17,500 -- -- -- --
Operating Officer 1995 125,489 1,953(4) -- -- -- --
Edward S. Zielinski(1).... 1997 115,012 34,689(5) -- -- -- --
Executive Vice President 1996 110,388 19,968(6) -- -- -- --
1995 90,837 1,953(4) -- -- -- --
John P. Brooks............ 1997 36,000 117,832(7) -- -- -- --
Senior Vice President 1996 36,000 95,518(7) -- -- -- --
1995 36,000 83,348(7) -- -- -- --
</TABLE>

- ---------------
(1) Effective as of January 1, 1998, each of Mr. Martori, Ms. Stone and Mr.
Zielinski entered into an employment agreement with the Company which
establishes the rates of annual base and incentive compensation to be
received by him or her commencing on such date. See "-- Employment
Agreements."

(2) Excludes Profit Sharing Plan contributions on behalf of the executive
officer. During 1994 the Company adopted a Profit Sharing Plan and has since
declared 1994, 1995, 1996 and 1997 contributions. No executive officer was
allocated more than $3,800, $4,000 and $4,100 for the 1994, 1995 and 1996
plan years, respectively.

(3) Includes 7,500 shares of unrestricted ILX Common Stock at $5.625 per share
and 7,500 shares of restricted ILX Common Stock at $2.8125 per share.

(4) Represents 500 shares of restricted ILX Common Stock at $3.90625 per share.

(5) Includes 3,500 shares of unrestricted ILX Common Stock at $5.625 per share.

(6) Includes 1,000 shares of restricted ILX Common Stock at $3.75 per share.

(7) Includes commissions on sales of Vacation Ownership Interests.

OPTION GRANTS IN THE LAST FISCAL YEAR

No stock options or stock appreciation rights were granted to Named
Executive Officers or to other employees in 1997.

OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END
OPTION VALUES

The following table sets forth information regarding option exercises by
the Named Executive Officers during 1997 and unexercised options held by Named
Executive Officers at December 31, 1997.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Martori............. 0 $0 0 0 $ 0 $ 0
Nancy J. Stone................ 0 0 5,000 0 0 0
Edward S. Zielinski........... 0 0 6,000 0 0 0
John P. Brooks................ 0 0 4,000 0 0 0
</TABLE>

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<PAGE> 76

DIRECTOR COMPENSATION

The Company's policy is to pay a fee for each Board of Directors' meeting
attended by directors who are not employees of the Company, and reimburse all
directors for actual expenses incurred in connection with attending meetings of
the Board of Directors. The fee for each Board of Directors' meeting attended by
a non-employee director is $1,000. In addition, all non-employee directors
receive a grant of options to purchase 5,000 shares of Common Stock following
their election to the Board of Directors. The options are fully exercisable on
the first anniversary of the date of grant.

STOCK OPTION PLANS

The Company's stock option plans are administered by the Compensation
Committee of the Board of Directors, which selects the persons to whom stock
options are granted and determines the number of shares of Common Stock covered
by the option, its exercise price or purchase price, and its expiration date.

1995 Stock Option Plan. The Company's 1995 Stock Option Plan was adopted
by the Board of Directors in July 1995 (the "1995 Stock Option Plan"). The 1995
Stock Option Plan authorizes the Board of Directors of the Company to grant
options to purchase the Company's authorized but unissued or reacquired Common
Stock to the key employees of the Company or its subsidiaries. The aggregate
number of shares of Common Stock which may be issued under the Stock Option Plan
is 100,000 shares, all of which were available for future grants as of December
31, 1997. Stock options entitle the optionee to purchase Common Stock from the
Company for a specified exercise price as determined by the Board of Directors,
during a period specified in the applicable option agreement.

Under the 1995 Stock Option Plan, the Company may grant options that are
intended to qualify as incentive stock options within the meaning of Section 422
of the Code ("Incentive Stock Options"), or options not intended to qualify as
Incentive Stock Options ("Nonstatutory Options"). The options are granted for
investment purposes only and are not transferable except by the laws of descent
and devise.

Incentive Stock Options may only be granted to employees of the Company.
They are exercisable one year after the grant of the options and expire on the
earlier of (i) five years after the date of grant as to any optionee who
immediately before the granting of the options owned more than ten percent of
the total combined voting power of all classes of stock of the Company or any of
its subsidiaries or (ii) ten years after the date of grant of the option as to
any optionee whose stock ownership represented less than ten percent of the
Company or any of its subsidiaries' combined voting power immediately before the
date of grant. Nonstatutory Stock Options are exercisable at any time after they
are granted and their durations are determined by the Board of Directors. All
options granted pursuant to the 1995 Stock Option Plan are subject to earlier
termination in the event of the termination of the optionee's employment with
the Company.

1992 Stock Option Plan. The Company's 1992 Stock Option Plan was adopted
by the Board of Directors in May 1992 (the "1992 Stock Option Plan"). The 1992
Stock Option Plan authorizes the Board of Directors of the Company to grant
options to purchase the Company's authorized but unissued or reacquired Common
Stock to the key employees of the Company or its subsidiaries. The aggregate
number of shares of Common Stock which may be issued under the 1992 Stock Option
Plan is 100,000 shares, of which 39,600 were available for future grants as of
December 31, 1997. Stock options entitle the optionee to purchase Common Stock
from the Company for a specified exercise price as determined by the Board of
Directors, during a period specified in the applicable option agreement.

Under the 1992 Stock Option Plan, the Company may grant Incentive Stock
Options or Nonstatutory Options. All options granted pursuant to the 1992 Stock
Option Plan are granted for investment purposes only and neither type of options
are transferable except by laws of descent and devise.

75
<PAGE> 77

percent of the Company or any of its subsidiaries' combined voting power
immediately before the granting of the options. Nonstatutory Stock Options are
exercisable at any time after they are granted and their durations are
determined by the Board of Directors. However, both types of options are subject
to earlier termination in the event of the termination of the optionee's
employment with the Company.

EMPLOYMENT AGREEMENTS

The Company entered into employment agreements with each of Mr. Joseph
Martori, Ms. Nancy Stone and Mr. Edward Zielinski to serve as Chairman and Chief
Executive Officer of the Company; President of the Company; and Executive Vice
President of the Company and President of the Company's wholly-owned subsidiary,
Varsity Clubs of America, Inc. respectively. Each of these agreements has a
four-year term which expires in December 2001. These agreements provide for an
annual base salary of $200,000 to Mr. Martori, $150,000 to Ms. Stone and
$130,000 to Mr. Zielinski. In addition, each employee may receive certain
incentive compensation at the discretion of the Board of Directors. Ms. Stone
and Mr. Zielinski are also entitled to receive awards of 15,000 and 7,000 shares
of restricted Common Stock, respectively, on January 1, 1998 and each
anniversary thereof provided that he or she is employed by the Company on the
date of grant.

Under each agreement, the respective employee's employment may be
terminated prior to its expiration (i) by the Company for Good Cause (defined as
his or her willful breach or habitual neglect of his or her duties under the
employment agreement, willful violation of reasonable and substantial rules
governing employee performance, willful refusal to obey reasonable orders in a
manner amounting to gross insubordination or commission of dishonest acts), (ii)
upon the employee's disability or death or (iii) upon thirty days notice of
either party. If the employee is terminated without "Good Cause" prior to the
expiration of the agreement, they are entitled to receive their base salary for
the twelve month period following such termination. The agreements generally
prohibit each employee from competing with the Company during his or her
respective term of employment by the Company and for a period of twelve months
following the respective employee's termination for Good Cause. In addition,
each agreement contains customary confidentiality provisions in favor of the
Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a summary of transactions entered into on behalf of the
Company or its subsidiaries since January 1, 1997, in which the amount involved
exceeded $60,000 and in which officers, directors, nominees and/or greater than
5% beneficial owners of the Company's Common Stock (or any immediate family
members of the foregoing) had, or will have, a direct or indirect material
interest.

In August 1992, LAP issued to MEI, as agent for EJM, MEI, Arthur J. Martori
and Mishkin, a $770,000 promissory note bearing interest at 14%, collateralized
by $810,630 in notes receivable. The promissory note was issued to reduce Class
A limited partners' capital contributions by $500,000, Class A priority returns
by $149,954, Class B accrued interest by $73,772 and certain loan guarantee fees
by $46,274. Principal payments of $52,181 and interest payments of $13,548 were
made during 1997.

In December 1995, LAP issued 10% promissory notes to EJM and Joseph P.
Martori, a trustee for Polich (not an affiliate of the Company), in the original
principal amounts of $550,000 and $350,000. In 1997, 36,800 shares of the
Company's Common Stock were issued in satisfaction of the remaining $230,000
principal amount of the note payable to EJM. The note payable for the benefit of
Polich matures on December 31, 1999, is secured by 122 Vacation Ownership
Interests in Kohl's Ranch and is convertible into Common Stock at a price of
$7.50 per share. In 1997, LAP paid $68,792 in principal and interest on the note
payable for the benefit of Polich and $17,203 in interest on the note payable to
EJM.

76
<PAGE> 78

In June 1997, the Company entered into an exclusive agreement for financial
advisory, investment banking and agency services with the Underwriter. In
exchange for these services, the Company issued 12,000 shares of Common Stock on
August 1, 1997 and is obligated to issue an additional 12,000 shares on February
1, 1998. The shares issued in August 1997 have been registered for resale and
the Company is obligated to register for resale the shares to be issued in
February 1998.

During 1997, the Company made payments of interest in the aggregate amount
of $72,726 to EJM on an 8% promissory note in the principal amount of $909,078,
due December 31, 1999. The note was issued by the Company as consideration for
all of the Class A Limited Partnership Interests in LAP, which the Company
acquired in 1994. The note is convertible into shares of Common Stock at a price
of $10.00 per share, provided such conversion does not cause EJM's ownership,
direct or indirect, of the Common Stock to exceed 50% of the total outstanding
shares.

During 1997, LAP made a capital distribution of $140,000 to MEI, a Class B
Limited Partner at the time of distribution.

Effective as of January 1, 1998, the Company entered into four year
employment agreements with each of Messrs. Martori and Zielinski and Ms. Stone.
Pursuant to these agreements, the Company shall provide an annual base salary of
$200,000 to Mr. Martori, $150,000 to Ms. Stone and $130,000 to Mr. Zielinski, in
addition to additional compensation payable at the discretion of the Board of
Directors. Ms. Stone and Mr. Zielinski are entitled to receive 15,000 and 7,000
restricted shares of Common Stock on January 1st of each year during the term of
their respective employment.

Joseph P. Martori, Chairman of the Board and Chief Executive Officer of the
Company, is also the Chairman of the Board of MEI, which owns 36.0% of the
Common Stock outstanding as of December 15, 1997 ( % on the closing of the
Offering, % if the Underwriters' over-allotment option is exercised in
full). The voting stock of MEI is controlled by EJM, who is a cousin of Joseph
P. Martori. EJM served as a Director of the Company from December 1993 to
November 1997. See "Risk Factors -- Voting Control by Existing ILX
Shareholders."

Mr. Hamel, who became a director of the Company in December 1997, is Chief
Operating Officer of Resort Funding Inc. ("RFI"). Since January 1, 1997, the
Company has borrowed $3,811,924 and has made payments of principal and interest
in the aggregate amounts of $1,440,305 and $627,296, respectively, to RFI
pursuant to certain notes payable issued by the Company in connection with the
financing of construction of VCA-Tucson and VCA-South Bend and for its general
working capital purposes. In addition, during 1997, RFI purchased Customer Notes
with aggregate principal balances of $8,421,219. At September 30, 1997, the
Company was indebted to RFI in the aggregate principal amount of $6,015,662.

The above-described transactions are believed to be on terms no less
favorable to the Company than those available in arms' length transactions with
unaffiliated third parties. Each transaction has been approved by independent
directors of the Company who are not parties to the transaction.

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<PAGE> 79

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of December 31, 1997, certain
information regarding the beneficial ownership of the Common Stock of the
Company by (i) each person known by the Company to have beneficial ownership of
5% or more of the outstanding Common Stock, (ii) each director, (iii) each Named
Executive Officer and (iv) all executive officers and directors as a group, and
their percentage ownership before and after this Offering. See "Description of
ILX Securities and Pertinent Arizona Statutes" for a description of the voting
and other rights of holders of the Company's Common Stock.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF % BEFORE % AFTER
BENEFICIAL OWNER(+) SHARES(1) OFFERING OFFERING
- ------------------------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Joseph P. Martori............................................ 954,724(2) 36.7%
Nancy J. Stone............................................... 75,418(3) 2.9%
Edward S. Zielinski.......................................... 11,320(4) *
John P. Brooks............................................... 4,800(5)
James W. Myers............................................... 9,800(6) *
Steven R. Chanen............................................. 5,000(7) *
Patrick J. McGroder III...................................... 17,015(8) *
Thomas J. Hamel.............................................. -0- 0.0%
Edward J. Martori............................................ 992,619(9) 38.2%
Martori Enterprises Incorporated............................. 934,310 36.0%
All Directors and Officers as a Group (9 persons)............ 1,126,586 42.7%
</TABLE>

- ---------------
* Less than 1%.

(+) Unless otherwise indicated, each holder has the address: c/o ILX Resorts
Incorporated, 2111 E. Highland Ave., Suite 210, Phoenix, Arizona 85016.

(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days after the date set forth in the
introductory paragraph above. For purposes of computing the percentage of
outstanding shares of Common Stock held by each person or group of persons
named above, any security which such person or group of persons has or have
the right to acquire from the Company within 60 days from the date set forth
in the introductory paragraph above is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.

(2) Includes 934,310 shares owned by MEI, of which Joseph P. Martori is a
director and owner of 40% of the voting capital stock, 4,602 shares owned by
Christina Ann Martori, daughter of Joseph P. Martori, under trust dated
February 20, 1978, and 212 shares held by a trust, of which Joseph P.
Martori is trustee.

(3) Includes 5,000 shares issuable pursuant to options from the Company and
10,000 shares issuable pursuant to options from MEI at $8.125 per share; and
includes 2,000 shares and options to purchase 17,500 shares from the Company
at $8.125 per share held by her husband, Michael W. Stone.

(4) Includes 200 shares held by Edward S. Zielinski as custodian for his son,
Stefan Edward Zielinski, options to purchase 6,000 shares from the Company
at $8.125 per share, and 100 shares held by his wife, Nancy Zielinski.

(5) Includes options to purchase 4,000 shares from the Company at $8.125 per
share.

(6) Includes 4,800 shares owned by Myers Capital Management of which James W.
Myers has sole voting and dispositive power and options to purchase 5,000
shares from the Company at $7.50 per share.

(7) Includes 5,000 shares issuable pursuant to options from the Company at $7.50
per share.

(8) Includes 1,500 shares held by the Patrick J. McGroder and Susan McGroder
Revocable Trust; 2,000 shares held by the McGroder Family Limited
Partnership in which Patrick J. McGroder and Susan McGroder have a 99%
interest; 2,280 shares held by Patrick J. McGroder III IRA; 5 shares held by
Shamrock Consultants, which is wholly owned by Patrick J. McGroder; 19
shares held by Patrick J.

78
<PAGE> 80

McGroder II, P.C., an Arizona professional corporation, wholly owned by
Patrick J. McGroder; 128 shares held by Patrick J. McGroder II, P.C. Profit
Sharing Trust, of which Patrick J. McGroder is the sole beneficiary; 10,000
shares held by McMac, L.L.C., an Arizona limited liability company of which
Patrick J. McGroder is one-third owner; 150 shares held by Mr. McGroder's
children's irrevocable trusts as follows: 50 shares held by the Caroline E.
McGroder 1992 Trust, 50 shares held by the Elizabeth McGroder 1992 Trust and
50 shares held by the Patrick J. McGroder IV 1992 Trust.

(9) Includes 934,310 shares owned by MEI, 56% of the voting capital stock of
which is owned by Edward J. Martori, and 142 shares owned by the Estate of
Edward Joseph Martori, of which Edward J. Martori is beneficiary.

79
<PAGE> 81

DESCRIPTION OF ILX SECURITIES AND PERTINENT ARIZONA STATUTES

ILX COMMON STOCK

Each share of ILX Common Stock entitles the holder thereof to one vote on
all matters submitted to a vote of ILX's shareholders, except that the election
of directors is by cumulative voting to the extent and in the manner provided by
Arizona law. In any election of directors, cumulative voting entitles each share
of Common Stock to a total number of votes equal to the total number of
directors to be elected. Such votes may be cast for one or more directors as the
shareholder desires. No holder of ILX Common Stock has any preemptive right to
subscribe for or purchase additional shares of ILX's stock. Holders of ILX
Common Stock are entitled to share ratably in all dividends not attributable to
the Series A or Series C Stock that are declared by the Board of Directors, and
in all assets available for distribution upon liquidation after giving effect to
the liquidation preferences of the Series A, Series B and Series C Stock.

SERIES A PREFERRED STOCK

In August 1991, ILX authorized and issued 110,000 shares of non-voting
Series A Stock, of which 59,845 shares remain issued and outstanding at
September 30, 1997. Beginning July 1, 1996, the Series A Stock is entitled to an
annual dividend of $.80 per share out of funds legally available therefor.
Dividends may not be paid on ILX Common, Series B or Series C Stock until the
Series A Stock sinking fund requirements and dividends payments are satisfied.
The Series A Stock has a liquidation preference of $10.00 per share that is
superior to the liquidation preferences of the Series B Stock and Series C Stock
and the liquidation rights on the ILX Common Stock. Beginning January 1, 1993,
ILX, through its wholly owned subsidiary, LAP, is required quarterly to make
provision for a dividend sinking fund in an amount equal to $100 for each
unrescinded sale of a Sedona Vacation Club annual Vacation Ownership Interest
made during the preceding calendar quarter. The foregoing discussion of the
Series A Stock is qualified in its entirety by reference to the Certificate of
Designation of the Series A Stock, a copy of which may be obtained from ILX.

SERIES B CONVERTIBLE PREFERRED STOCK

In August 1991, ILX authorized and issued 275,000 shares of non-voting
$10.00 par value Series B Convertible Preferred (the "Series B Stock") Stock, of
which 55,000 shares remain issued and outstanding at September 30, 1997. The
Series B Stock has a liquidation preference of $10.00 per share that is junior
to the liquidation preference of the Series A Stock but senior to the
liquidation preference of the Series C Stock and the liquidation rights on the
ILX Common Stock. From and after July 1, 1996, each share of Series B Stock may
be converted into two-fifths of a share of ILX Common Stock. The conversion rate
shall be adjusted for dividends paid in ILX Common Stock, stock splits, reverse
stock splits and stock reclassifications. No dividends are payable on the Series
B Stock. The foregoing discussion of the Series B Stock is qualified in its
entirety by reference to the Certificate of Designation for the Series B Stock,
a copy of which may be obtained from ILX.

SERIES C CONVERTIBLE PREFERRED STOCK

In November 1993, ILX authorized 309,000 shares of non-voting Series C
Stock. ILX issued 305,652 shares of Series C Stock, of which 265,623 shares
remain issued and outstanding at September 30, 1997. The Series C Stock was
issued, along with certain shares of ILX Common Stock, to former Genesis
shareholders in exchange for their Genesis common stock. The Series C Stock is
entitled to a Dividend Preference, when and as dividends are declared by ILX's
Board of Directors, out of any funds legally available therefor at the rate of
$.60 per share per annum, payable in preference and priority to any payment of
any dividend on ILX Common Stock but subordinate and subject to the dividend
rights of the Series A Stock. Except for Cumulation Shares (as hereafter
defined) issuable on conversion or liquidation of the Series C Stock, the right
to the Dividend Preference is not cumulative. If, during any year prior to
November 1, 1998, the Dividend Preference is not paid in full, the unpaid
portion thereof will accumulate through November 1, 1998 (the total amount of
such cumulation expressed in dollars is referred to herein as the "Dividend
Arrearage"). ILX is not required to pay the Dividend Preference in cash except
upon liquidation. "Cumulation Shares"

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<PAGE> 82

means the total Dividend Arrearage (as of the date of calculation thereof) owed
to any holder of Series C Stock with respect to all shares of Series C Stock
owned of record by such holder divided by $30.00. Partial fiscal years are to be
equitably prorated. The Series C Stock has a liquidation preference of $10.00
per share plus any Dividend Arrearage allocable to such shares. Such liquidation
preference is subordinate to the liquidation preferences of ILX's Series A Stock
and Series B Stock. The Series C Stock may be redeemed by ILX at any time at a
price of $10.00 per share plus payment of all declared but unpaid dividends. At
the option of the holder, shares of Series C Stock may be converted into shares
of ILX Common Stock prior to November 1, 2003 at a rate of one share of ILX
Common Stock, subject to adjustment, for every three shares of Series C Stock.
Upon conversion of a holder's Series C Stock, a holder of Series C Stock also
shall convert the applicable Dividend Arrearage with respect to such shares into
ILX Common Stock at the rate of one share of ILX Common Stock, subject to
adjustment, for every $30.00 of Dividend Arrearage. To date, no cash dividends
have been paid on the Series C Stock. This summary of the terms of the Series C
Stock is qualified in its entirety by the Certificate of Designation of the
Series C Stock, a copy of which may be obtained from ILX.

ARIZONA ANTI-TAKEOVER LEGISLATION AND ANTI-TAKEOVER DEVICES

Arizona Revised Statutes ("ARS") Sections 10-2701 et seq. were adopted by
the Arizona legislature in an attempt to prevent corporate "greenmail" and
restrict the ability of a potential suitor to acquire domestic corporations.
These statutes generally apply to business combinations or control share
acquisitions of "issuing public corporations," which defined term includes ILX.
These statutes could impede an acquisition of ILX and its affiliates. Section
10-2704 limits the ability of a corporation to repurchase stock from a
beneficial owner of more than 5% of the voting power of an issuing public
corporation unless certain conditions are satisfied. ARS Section 10-2705 limits
the ability of the issuing public corporation to enter into or amend any
agreements containing provisions that increase the current or future
compensation of any officer or director of the issuing public corporation during
any tender offer or request or invitation for tenders of any class or series of
shares of the issuing public corporation (other than an offer, request or
invitation by the issuing public corporation). ARS Sections 10-2721, et. seq.
regulates "control share acquisitions," defined as a direct or indirect
acquisition of beneficial ownership of shares of an issuing public corporation
that would, when added to all other shares of the issuing public corporation
beneficially owned by the acquiring person, entitle the acquiring person
immediately after the acquisition to exercise either (a) at least 20% but less
than 33 1/3% or (b) at least 33 1/3% but less than 50% or (c) more than 50% of
the voting power in the election of directors. Among other things, control share
acquisitions exclude statutory mergers and acquisitions, and acquisitions
pursuant to security agreements. Within ten days after engaging in a control
share acquisition, the acquiring person must deliver to the issuing public
corporation an information statement setting forth the identity of the acquiring
person and all of its affiliates, the number and class of securities of the
issuing public corporation beneficially owned before, and to be acquired in, the
control share acquisition, and the terms of the control share acquisition. The
shares acquired in a control share acquisition have all the same voting rights
as other shares in elections for directors, but do not have the right to vote on
other matters unless approved by a resolution of shareholders of the issuing
public corporation other than the acquiring person and any officer or director.
If the shareholders vote not to accord voting rights to the shares acquired by
the acquiring person, the issuing public corporation may redeem the control
shares at their then current market price. Finally, in certain circumstances,
ARS Section 10-2741 prohibits an issuing public corporation or a subsidiary
thereof from engaging in a business combination with any interested shareholder
(i.e., a beneficial owner of at least 10% of the outstanding shares of the
company or an affiliate thereof) of the issuing public corporation or any
affiliate or associate of the interested shareholder for three years after the
interested shareholder's share acquisition date.

The constitutionality of these provisions of Arizona law has not been
tested under Arizona or federal law. No assurance can be given that such
statutes would withstand any such constitutional challenge. The existence of
these statutes may make ILX a less attractive merger or acquisition candidate.

81
<PAGE> 83

Except as described above with respect to the statutory provisions of the
Arizona anti-takeover laws, ILX has not adopted any anti-takeover devices with
respect to its equity or debt securities. See "Risk Factors -- Arizona
Anti-takeover Provisions."

CERTAIN CHARTER AND BY-LAW PROVISIONS

In general, each director and officer of ILX is eligible to be indemnified
by the Company against all expenses, including attorneys' fees, judgments,
fines, punitive damages and amounts paid in settlement, that were incurred in
connection with a proceeding to which such director or officer was a party by
reason of the fact that such officer or director was acting on behalf of ILX,
unless (1) indemnification is expressly prohibited by applicable law or (2) as
to a director, if the individual breached his or her duty of loyalty to ILX, the
individual's acts or omissions are not in good faith, or the individual engaged
in intentional misconduct or a knowing violation of law. In addition, ILX will
not indemnify a director or officer for any liability incurred in a proceeding
initiated (or participated in as an intervenor or amicus curiae) by the officer
or director seeking indemnification unless such initiation or participation is
authorized by the affirmative vote of a majority of the directors in office.

ILX is required to advance funds to pay the expenses of any officer or
director involved in a proceeding, provided that such expenses are incurred in
good faith and ILX receives an undertaking that the individual will repay the
funds if it is ultimately determined that he or she is not entitled to
indemnification. The indemnification rights granted to ILX's officers and
directors are deemed to be a legally binding contract between ILX and each such
officer and director. Any repeal, amendment or modification of Articles 13 or 14
of ILX's Articles of Incorporation shall be effective prospectively and shall
not affect any prior rights or obligations concerning the indemnification of
ILX's officers and directors.

Article X of ILX's Amended and Restated Bylaws also require the Company to
indemnify its officers, directors, employees and agents against all expenses
incurred by them in connection with any legal action, including shareholder
derative suits, based on any action or omission alleged to have been committed
while acting within the scope of such relationship to the Company. Any such
claim for indemnification is subject to the good faith determination by the
Board of Directors that the person seeking indemnification did not act, fail to
act, or refused to act willfully or with gross negligence or with fraudulent or
criminal intent. Upon making such determination, indemnification is mandatory
unless the person seeking indemnification unreasonably refused to permit the
Company, at its own expense and through counsel of its choosing, to defend him
or her in the subject action.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

82
<PAGE> 84

UNDERWRITING

The Underwriters named below, for whom EVEREN Securities, Inc. is acting as
representative, have severally agreed to purchase, and the Company has agreed to
sell, subject to the terms and conditions set forth in an underwriting
agreement, dated March , 1998 (the "Underwriting Agreement"), the respective
number of shares of Common Stock set forth opposite their names below. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the shares if any are purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
--------------------------------------------------------------------- ----------------
<S> <C>
EVEREN Securities, Inc. .............................................

---------
Total......................................................
=========
</TABLE>

The Underwriters, through the Representative, have advised the Company that
they propose to offer the shares to the public at the Price to Public set forth
on the cover page of this Prospectus. The Underwriters may allow to selected
dealers a concession of not more than $ per share, and the Underwriters
may allow, and such dealers may reallow, a concession of not more than
$ per share to certain other dealers. After the Offering, the public
offering price, concession and reallowance may be changed by the Representative.
The Common Stock is offered subject to receipt and acceptance by the
Underwriters, and to certain other conditions, including the right to reject
orders in whole or in part.

The Company has granted to the Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to additional
shares to cover over-allotments at the public offering price less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as it was obligated to
purchase pursuant to the Underwriting Agreement.

The Underwriters have reserved up to shares of Common Stock offered
hereby to be sold at a discounted price to directors, officers and employees of
the Company and to certain other persons.

The Company and its officers, directors and certain shareholders have
agreed that, for a period of 180 days from the date of this Prospectus, they
will not, without the prior written consent of EVEREN Securities, Inc., directly
or indirectly, sell, offer to sell, grant any option for the sale of, or
otherwise dispose of any shares of Common Stock or any security convertible into
Common Stock, except for options granted pursuant to the Company's stock option
plans. In addition, the Company and its officers, directors and certain
shareholders have agreed that they will not, directly or indirectly, file with
the Securities and Exchange Commission a registration statement under the
Securities Act relating to, any additional shares of Common Stock or securities
convertible or exchangeable for any shares of Common Stock for a period of 180
days after the date of this Prospectus.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Underwriters may be required to make in respect
thereof.

The shares of Common Stock are quoted in the Nasdaq SmallCap Market under
the symbol "ILEX." The Company has received pre-approval for listing of its
Common Stock on the American Stock Exchange and, although there can be no
assurances, the Company intends to have its Common Stock commence trading on
that exchange during the first quarter of 1998 to apply to have the Common
Stock, including the shares of Common Stock offered hereby, included on the
American Stock Exchange, although there can be no assurance in this regard.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and

83
<PAGE> 85

purchase shares of Common Stock. As an exception to these rules, the
Representative is permitted to engage in certain transactions that stabilize the
price of the Common Stock. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the Common Stock. In
addition, if the Representative over-allots (i.e., if it sells more shares of
Common Stock than are set forth on the cover page of this Prospectus) and
thereby creates a short position in the Common Stock in connection with this
Offering, then the Representative may reduce that short position by purchasing
Common Stock in the open market. The Representative may also elect to reduce any
short position by exercising all or part of the over-allotment option described
herein. In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might otherwise be in the absence of such purchases. Neither the Company
nor any of the Underwriters makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the Common Stock. In addition, neither the Company nor any
of the Underwriters makes any representation that the Representative will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.

In June 1997, the Company entered into an agreement with the Underwriter
for the Underwriter to act as ILX's exclusive financial advisor, investment
banker and agent with respect to evaluation of alternatives to position ILX for
long-term growth and to enhance shareholder value. In exchange for their
services, ILX issued 12,000 shares of ILX common stock on August 1, 1997 and is
obligated to issue an additional 12,000 shares on February 1, 1998. In
accordance with the terms of the agreement, ILX has registered with the
Securities and Exchange Commission the shares issued in August and intends to
cause the shares to be issued in February to be so registered. The parties
intend for the agreement to remain in effect for a minimum of one year.

LEGAL MATTERS

Certain legal matters with respect to the Company and the validity of the
securities offered hereby will be passed upon for the Company by Squire, Sanders
& Dempsey L.L.P., Phoenix, Arizona. Certain legal matters will be passed upon
for the Underwriter by O'Melveny & Myers LLP, San Francisco, California.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1995 and 1996 and September 30, 1997, and for each of the three years in the
period ended December 31, 1996 and the nine months ended September 30, 1997
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement on Form S-1 with the
Commission, under the Securities Act, with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is hereby made to such Registration Statement, exhibits and
schedules. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.

ILX is subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance with the
Exchange Act files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information including the Registration Statement filed with
the Commission by ILX can

84
<PAGE> 86

be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material may be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission
maintains a web site that contains reports, proxy statements and other
information filed electronically with the Commission (http://www.sec.gov).

85
<PAGE> 87

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Financial Statements
Consolidated Balance Sheets at December 31, 1995 and 1996, and September 30,1997.... F-3
Consolidated Statements of Operations for the years ended December 31, 1994, 1995
and 1996, and the nine months ended September 30, 1996 (unaudited) and 1997...... F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31,
1994, 1995 and 1996, and the nine months ended September 30, 1997................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995
and 1996, and the nine months ended September 30, 1996 (unaudited) and 1997...... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>

F-1
<PAGE> 88

INDEPENDENT AUDITORS' REPORT

Shareholders of ILX Resorts Incorporated
Phoenix, Arizona

We have audited the accompanying consolidated balance sheets of ILX Resorts
Incorporated (formerly ILX Incorporated) and Subsidiaries (the "Company") as of
December 31, 1995 and 1996 and September 30, 1997 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996 and the nine months ended
September 30, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1995 and 1996 and September 30, 1997 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996 and
the nine months ended September 30, 1997 in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE LLP

December 23, 1997, except for Note 1, as to which the date is January 9, 1998
Phoenix, Arizona

F-2
<PAGE> 89

ILX RESORTS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Cash and cash equivalents....................... $ 3,746,518 $ 3,523,047 $ 2,218,261
Notes receivable, net (Notes 2, 6, 9, 10 and
13)........................................... 8,785,487 11,745,720 15,933,418
Resort property held for Vacation Ownership
Interests sales (Notes 2, 3, 9, 10 and 16).... 14,851,856 15,247,587 14,230,827
Resort property under development (Notes 5 and
9)............................................ 1,119,080 1,209,706 1,727,833
Land held for sale.............................. 1,545,184 1,547,493 1,551,065
Deferred assets (Note 6)........................ 451,496 313,346 313,813
Property and equipment, net (Notes 7, 9 and
16)........................................... 3,175,420 4,877,467 5,182,104
Deferred income taxes (Note 8).................. 1,887,021 1,178,653 764,449
Other assets.................................... 2,190,451 1,631,886 1,938,462
----------- ----------- -----------
TOTAL ASSETS.......................... $37,752,513 $41,274,905 $ 43,860,232
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable................................ $ 2,313,638 $ 2,310,600 $ 1,919,757
Accrued and other liabilities................... 4,662,872 4,658,222 2,976,446
Due to affiliates (Note 15)..................... 440,629 139,715 41,336
Notes payable (Note 9).......................... 11,689,945 14,867,096 19,250,677
Notes payable to affiliates (Notes 10 and 15)... 1,837,912 1,567,287 3,110,106
----------- ----------- -----------
20,944,996 23,542,920 27,298,322
----------- ----------- -----------
MINORITY INTERESTS (Note 11).................... 3,032,415 2,556,865 --
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 12 and 19)
SHAREHOLDERS' EQUITY (Notes 13 and 14)
Preferred stock, $10 par value; 10,000,000
shares authorized; 411,483, 392,109 and
380,468 shares issued and outstanding;
liquidation preference of $4,114,830,
$3,921,090 and $3,804,680, respectively.... 1,515,134 1,419,243 1,384,891
Common stock, no par value; 30,000,000 shares
authorized; 2,525,151, 2,604,858 and
2,692,433 shares issued (Note 1)........... 9,322,375 9,788,738 10,275,111
Treasury stock, at cost, 4,000, 6,000 and
6,100 shares, respectively................. (25,032) (36,536) (37,099)
Additional paid in capital.................... 35,190 78,300 79,450
Retained earnings............................. 2,927,435 3,925,375 4,859,557
----------- ----------- -----------
Total shareholders' equity................. 13,775,102 15,175,120 16,561,910
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.............................. $37,752,513 $41,274,905 $ 43,860,232
=========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 90

ILX RESORTS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1994 1995 1996 1997
----------- ----------- ----------- 1996 -----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
TIMESHARE REVENUES:
Sales of Vacation Ownership
Interests.................. $18,713,970 $21,353,758 $19,639,194 $15,270,596 $17,750,423
Resort operating revenue...... 8,764,558 8,868,344 11,136,591 7,996,778 8,000,593
Interest income............... 402,596 627,081 997,500 712,628 973,236
----------- ----------- ----------- ----------- -----------
Total timeshare revenues... 27,881,124 30,849,183 31,773,285 23,980,002 26,724,252
----------- ----------- ----------- ----------- -----------
COST OF SALES AND OPERATING
EXPENSES:
Cost of Vacation Ownership
Interests sold............. 2,393,298 3,529,566 3,101,023 2,311,644 2,369,296
Cost of resort operations..... 7,807,857 9,354,382 10,596,007 7,924,836 7,938,745
Sales and marketing........... 10,141,147 10,971,694 10,677,905 7,817,019 10,237,066
General and administrative.... 1,772,812 3,410,118 2,115,058 1,613,644 2,003,106
Provision for doubtful
accounts................... 764,065 1,235,417 590,653 459,143 526,352
Depreciation and
amortization............... 1,425,792 696,062 476,467 543,643 345,145
----------- ----------- ----------- ----------- -----------
Total cost of sales and
operating expenses....... 24,304,971 29,197,239 27,557,113 20,669,929 23,419,710
----------- ----------- ----------- ----------- -----------
Timeshare operating income...... 3,576,153 1,651,944 4,216,172 3,310,073 3,304,542
----------- ----------- ----------- ----------- -----------
Land and other business:
Sales of land and other....... 2,472,141 1,856,947 377,524 331,615 67,563
Cost of land sold and other... 1,955,631 1,664,971 327,220 291,017 50,978
----------- ----------- ----------- ----------- -----------
Income from land and other
business...................... 516,510 191,976 50,304 40,598 16,585
----------- ----------- ----------- ----------- -----------
Total operating income.......... 4,092,663 1,843,920 4,266,476 3,350,671 3,321,127
Interest expense (Notes 9 and
10)........................... (666,141) (1,265,227) (1,975,110) (1,406,073) (1,500,472)
----------- ----------- ----------- ----------- -----------
Income before income taxes and
minority interests............ 3,426,522 578,693 2,291,366 1,944,598 1,820,655
Income tax (expense) benefit
(Note 8)...................... 161,799 547,216 (678,822) (607,371) (656,302)
----------- ----------- ----------- ----------- -----------
Income before minority
interests..................... 3,588,321 1,125,909 1,612,544 1,337,227 1,164,353
Minority interests (Note 11).... (1,440,034) (501,246) (561,428) (486,469) (178,307)
----------- ----------- ----------- ----------- -----------
NET INCOME...................... $ 2,148,287 $ 624,663 $ 1,051,116 $ 850,758 $ 986,046
=========== =========== =========== =========== ===========
NET INCOME PER COMMON AND
EQUIVALENT SHARE (NOTE 1)..... $ 0.86 $ 0.25 $ 0.41 $ 0.33 $ 0.37
=========== =========== =========== =========== ===========
NUMBER OF COMMON AND EQUIVALENT
SHARES (NOTE 1)............... 2,492,649 2,542,167 2,589,857 2,578,007 2,651,535
=========== =========== =========== =========== ===========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 91

ILX RESORTS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK TREASURY STOCK ADDITIONAL
-------------------- ------------------------- ----------------- PAID IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------- ---------- --------- ----------- ------ -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER
31, 1993.......... 438,175 $1,673,028 2,416,723 $ 8,681,349 $ 30,000 $ 157,118 $10,541,495
Net income.......... 2,148,287 2,148,287
Issuance of common
stock for
acquisition....... 24,600 123,000 123,000
Other issuance of
common stock...... 4,923 29,232 29,232
Exchange of
preferred stock
for common
stock............. (7,260) (20,038) 2,420 20,038
Exercise of
options........... 32,517 121,135 121,135
Exchange of
preferred stock
for lodging
certificates...... (245) (2,450) (2,450)
Exercise of cash
options........... (357) (1,785) (119) (1,785) (3,570)
------- ---------- --------- ----------- ------ -------- ------- ---------- -----------
BALANCES, DECEMBER
31, 1994.......... 430,313 1,648,755 2,481,064 8,972,969 30,000 2,305,405 12,957,129
Net income.......... 624,663 624,663
Issuance of common
stock for
acquisition....... 24,000 240,000 240,000
Other issuance of
common stock...... 17,220 86,212 86,212
Exchange of
preferred stock
for common
stock............. (7,524) (20,766) 2,508 20,766
Issuance of
cumulation shares
for dividend
arrearage......... 372 2,613 (2,633) (20)
Exchange of
preferred stock
for lodging
certificates...... (11,267) (112,670) 5,190 (107,480)
Exercise of cash
options........... (39) (185) (13) (185) (370)
Acquisition of
treasury shares... (4,000) $(25,032) (25,032)
------- ---------- --------- ----------- ------ -------- ------- ---------- -----------
BALANCES, DECEMBER
31, 1995.......... 411,483 1,515,134 2,525,151 9,322,375 (4,000) (25,032) 35,190 2,927,435 13,775,102
Net income.......... 1,051,116 1,051,116
Issuance of common
stock............. 74,500 423,875 423,875
Exchange of
preferred stock
for common
stock............. (13,515) (37,301) 4,505 37,301
Issuance of
cumulation shares
for dividend
arrearage......... 702 5,187 (5,207) (20)
Exchange of
preferred stock
for lodging
certificates...... (824) (8,240) 4,760 (3,480)
Redemption of
preferred stock... (5,035) (50,350) 38,350 (12,000)
Payment of
dividends......... (47,969) (47,969)
Acquisition of
treasury shares... (2,000) (11,504) (11,504)
------- ---------- --------- ----------- ------ -------- ------- ---------- -----------
BALANCES, DECEMBER
31, 1996.......... 392,109 1,419,243 2,604,858 9,788,738 (6,000) (36,536) 78,300 3,925,375 15,175,120
Net income.......... 986,046 986,046
Issuance of common
stock............. 83,000 451,125 451,125
Exchange of
preferred stock
for common
stock............. (11,334) (31,282) 3,778 31,282
Issuance of
cumulation shares
for dividend
arrearage......... 797 3,966 (3,970) (4)
Exchange of
preferred stock
for lodging
certificates...... (307) (3,070) 1,150 (1,920)
Payment of
dividends......... (47,894) (47,894)
Acquisition of
treasury shares... (100) (563) (563)
------- ---------- --------- ----------- ------ -------- ------- ---------- -----------
BALANCES, SEPTEMBER
30, 1997.......... 380,468 $1,384,891 2,692,433 $10,275,111 (6,100) $(37,099) $ 79,450 $4,859,557 $16,561,910
======= ========== ========= =========== ====== ======== ======= ========== ===========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 92

ILX RESORTS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- ---------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $ 2,148,287 $ 624,663 $ 1,051,116 $ 850,758 $ 986,046
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Undistributed minority interest.......... 760,306 501,246 531,370 239,258 178,032
Deferred income taxes.................... (885,408) (603,842) 708,368 735,150 414,204
Provision for doubtful accounts.......... 764,065 1,235,417 590,653 459,143 526,352
Depreciation and amortization............ 1,425,792 696,062 476,467 543,643 345,145
Amortization of guarantee fees........... 140,550 100,350 72,100 56,300 67,150
Change in assets and liabilities:
Decrease (increase) in resort property
held for Vacation Ownership Interest
sales............................... 870,858 (4,397,799) 532,072 485,381 1,016,760
Increase in resort property under
development......................... (1,735,592) (417,680) (90,626) (65,269) (518,127)
(Increase) decrease in land held for
sale................................ 1,440,765 127,984 (2,309) (2,309) (3,572)
Decrease (increase) in other assets.... (862,965) (296,028) 356,893 (198,852) (11,637)
(Decrease) increase in accounts
payable............................. (218,535) 731,979 (3,038) (141,757) (390,843)
Increase (decrease) in accrued and
other liabilities................... 628 1,903,936 (46,306) (191,012) 455,444
(Decrease) increase in due to
affiliates.......................... 255,658 (543,905) (200,914) (240,863) (98,379)
Decrease in deferred income............ (91,704) (365,195) -- -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities................................. 4,012,705 (702,812) 3,975,846 2,529,571 2,966,575
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable, net...................... (843,335) (3,270,008) (3,550,886) (3,123,123) (4,429,967)
Decrease (increase) in deferred assets..... (353,251) 198,153 66,050 66,050 (67,617)
Purchases of property and equipment, net... (581,435) (84,237) (35,577) (242,465) (492,988)
Net cash paid for minority interest........ (371,250) -- -- -- (820,000)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities........ (2,149,271) (3,156,092) (3,520,413) (3,299,538) (5,810,572)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable................ 6,165,996 9,593,122 5,693,139 4,181,139 6,208,386
Proceeds from notes payable to
affiliates............................... -- 900,000 -- -- --
Principal payments on notes payable........ (6,006,073) (5,841,405) (5,416,266) (3,826,898) (4,374,662)
Principal payments on notes payable to
affiliates............................... (567,074) (742,672) (370,625) (339,350) (202,181)
Distributions to minority partners......... -- -- (937,534) (720,000) (140,000)
Proceeds from issuance of common stock..... 122,767 86,212 423,875 423,875 96,125
Acquisition of treasury stock and other.... (3,570) (25,422) (11,524) -- (563)
Redemption of preferred stock.............. -- -- (12,000) (12,000) --
Preferred stock dividend payments.......... -- -- (47,969) (47,971) (47,894)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities................................. (287,954) 3,969,835 (678,904) (341,205) 1,539,211
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ 1,575,480 110,931 (223,471) (1,111,172) (1,304,786)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD..................................... 2,060,107 3,635,587 3,746,518 3,746,518 3,523,047
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD... $ 3,635,587 $ 3,746,518 $ 3,523,047 $ 2,635,346 $ 2,218,261
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Notes payable issued or assumed to purchase
assets or minority interest.............. $ 1,880,698 $ 2,606,550 $ 3,080,278 $ 3,080,278 $ 1,975,000
Notes payable assumed by buyer of property
and equipment............................ -- (320,000) (180,000) (180,000) --
Common stock issued to acquire assets or in
exchange for indebtedness................ 123,000 240,000 -- -- 355,000
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 93

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
UNAUDITED INTERIM INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996

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 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.

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.

September 30, 1996 Interim Financial Statements (Unaudited)

The accompanying financial statements for the nine months ended September
30, 1996 and related disclosures are unaudited. These unaudited condensed
interim financial statements do not include all of the disclosures provided in
the annual consolidated financial statements and have been prepared in
accordance with Article 10 of Regulation S-X. The interim financial statements
should be read in conjunction with the accompanying audited financial statements
and footnotes thereto. In the opinion of the Company, all adjustments
(consisting of only normal recurring adjustments) necessary to fairly present
the financial position, results of operations, and cash flows have been
reflected in the financial statements for the nine months ended September 30,
1996.

Net Income per Share

Net income per common and equivalent share is based on the weighted average
number of common shares outstanding, including common stock equivalents which
have a dilutive effect. Common stock equivalents consist of Series B Convertible
Preferred Stock, warrants and shares issuable under the stock option plans
(Notes 13 and 14). Net income per common share and common equivalent share is
based on net income adjusted for declared dividends on Series A Preferred Stock
and undeclared dividends on Series C Preferred Stock.

Resort Property Held for Vacation Ownership Sales

Resort property held for Vacation Ownership Interest sales is recorded at
the lower of historical cost less amounts charged to cost of Vacation Ownership
Interests sold or market. As Vacation Ownership Interests are sold, the Company
amortizes to cost of sales the average carrying value of the property plus
estimated future additional costs related to remodeling and construction.

F-7
<PAGE> 94

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
UNAUDITED INTERIM INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996

Land Held for Sale

Land held for sale is recorded at the lower of cost or fair value less cost
to sell, consistent with the Company's intention to liquidate these properties.

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.

Property and Equipment

Property and equipment are stated at cost and are depreciated on the
straight-line method over their respective estimated useful lives ranging from 3
to 30 years. Property and equipment under capitalized leases are stated at the
lesser of fair value or the present value of future minimum lease payments as of
the date placed in service, and amortized on the straight-line method over the
term of the lease.

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 to resort property under development:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- -----------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest.............................. $716,000 $1,271,000 $1,746,000 1,377,000 $1,547,000
Income taxes.......................... 17,000 221,000 723,000 2,000 --
Interest capitalized.................. -- 228,000 95,000 54,000 140,000
</TABLE>

Accounting Matters

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which is effective for the Company beginning January
1, 1996. SFAS 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company did not grant any stock options to employees in
1996 or for the nine months ended September 30, 1997. The Company intends to
continue to apply APB Opinion No. 25 to any future stock options that may be
granted to employees.

In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("SFAS 125"), which is

F-8
<PAGE> 95

ILX RESORTS INCORPORATED AND SUBSIDIARIES

effective for fiscal years beginning after December 31, 1996. During 1997, SFAS
125 was adopted and had no significant impact on the Company's financial
position, results of operations or cash flows.

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("SFAS 128"), which specifies new computation,
presentation and disclosure requirements. SFAS 128 will be effective for both
interim and annual periods ending after December 15, 1997. Management believes
that the adoption of SFAS 128 will not have a material impact on the earnings
per share presented.

In February 1997, the Financial Accounting Standards Board issued SFAS No.
129, "Disclosure of Information about Capital Structure" ("SFAS 129"), which is
effective for financial statements for periods ending after December 15, 1997
and establishes standards for disclosing information about an entity's capital
structure. The Company does not believe the adoption of SFAS 129 will have a
significant effect on its disclosures about capital structure.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which is effective for financial
statements for periods ending 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 does not believe the adoption of SFAS 130 will have a
material impact on its financial statement presentation or related disclosures.

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. SFAS 131 may require additional disclosures and will be effective
beginning January 1, 1998.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassifications

The financial statements for prior periods have been reclassified to be
consistent with the current period financial statement presentation.

F-9
<PAGE> 96

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTE 2 NOTES RECEIVABLE

Notes receivable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Vacation Ownership Interest notes
receivable................................ $ 7,913,111 $10,559,309 $ 14,763,222
Holdbacks by financial institutions......... 2,736,882 3,481,061 3,929,141
Other receivables........................... 546,394 275,347 263,576
Allowance for possible credit losses........ (2,410,900) (2,569,997) (3,022,521)
----------- ----------- -----------
$ 8,785,487 $11,745,720 $ 15,933,418
=========== =========== ===========
</TABLE>

Notes generated from the sale of Vacation Ownership Interests bear interest
at annual rates ranging from 11% to 16% and have terms of five to ten years. The
notes are collateralized by deeds of trust on the Vacation Ownership Interests
sold.

The Company has agreements with financial institutions for total
commitments aggregating $20 million under which the Company may sell certain of
its notes receivable. 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 to yield the consumer
market rate as defined by the financial institution. At September 30, 1997,
approximately $8.0 million is available under these commitments.

The Company also has financing commitments aggregating $14.2 million
whereby the Company may borrow against notes receivable pledged as collateral.
These borrowings bear interest at prime plus 3.25% to prime plus 5% and expire
at various dates from 1998 through 2003. At September 30, 1997, approximately
$8.1 million is available under these commitments.

At December 31, 1995 and 1996 and September 30, 1997, the Company had
approximately $20 million, $22 million and $23 million, respectively, in
outstanding notes receivable sold on a recourse basis. Portions of the notes
receivable are secured by deeds of trust on Los Abrigados Resort & Spa ("Los
Abrigados"), Golden Eagle Resort and Varsity Clubs of America-South Bend
("VCA-South Bend").

At December 31, 1995 and 1996 and September 30, 1997, the Company had
approximately $181,000, $188,000 and $167,000, respectively, in additional
outstanding notes sold on a recourse basis to related parties.

At September 30, 1997, notes receivable in the amount of approximately
$296,000 have been contributed to the Company's Series A Preferred Stock sinking
fund and therefore their use is restricted. (Note 13).

The following summarizes activity in the allowance for possible credit
losses:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
NINE MONTHS ENDED
1994 1995 1996 SEPTEMBER 30, 1997
---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Beginning balance........... $ 815,353 $1,262,483 $2,410,900 $2,569,997
Provision for doubtful
accounts.................. 764,065 1,235,417 590,653 526,352
Amounts written off......... (316,935) (87,000) (431,556) (73,828)
---------- ---------- ---------- ----------
Ending balance.............. $1,262,483 $2,410,900 $2,569,997 $3,022,521
========== ========== ========== ==========
</TABLE>

At December 31, 1995 and 1996 and September 30, 1997, the above allowance
includes $400,000, $440,000 and $460,000 respectively, for notes sold with
recourse.

F-10
<PAGE> 97

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTE 3 RESORT PROPERTY HELD FOR VACATION OWNERSHIP INTEREST SALES

Resort property held for Vacation Ownership Interests sales consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Los Abrigados........................... $ 3,883,064 $ 4,325,052 $ 4,301,928
The Inn at Los Abrigados................ -- 773,911 1,004,715
Golden Eagle Resort..................... 2,029,287 2,242,947 2,351,731
Kohl's Ranch Lodge...................... 1,939,879 2,110,012 1,989,956
VCA -- South Bend....................... 6,915,206 5,692,165 4,538,397
Costa Vida Resort....................... 18,420 40,500 11,100
Ventura Resort.......................... 66,000 63,000 33,000
----------- ----------- -----------
$14,851,856 $15,247,587 $ 14,230,827
=========== =========== ===========
</TABLE>

In September 1994, the Company acquired, for $15,000, an option from an
affiliate to purchase 667 Vacation Ownership Interests in Los Abrigados which
were sold in 1992. The terms of the option agreement provide that the seller may
sell to the Company or the Company may acquire from the seller up to 25 Vacation
Ownership Interests per month and, in addition, up to one half of the remainder
of the 667 Vacation Ownership Interests per year, for $2,100 per Vacation
Ownership Interest. The seller must provide the Company with written notice of
its intent to sell 30 days in advance of a monthly sale and 180 days in advance
of an annual sale. The Company had purchased 560 Vacation Ownership Interests
under this option as of September 30, 1997.

In June 1995, the Company acquired Kohl's Ranch Lodge, a ten acre-rustic
resort near Payson, Arizona for a purchase price of $1,590,000, consisting of a
$50,000 cash down payment, assumption of an existing deed of trust of $932,250,
issuance of a $367,750 second deed of trust to the seller and the issuance of
24,000 shares of restricted common stock valued at $10 per share. The Company
made improvements to the property and commenced timeshare sales in July 1995.

Varsity Clubs of America Incorporated ("Varsity Clubs"), a wholly-owned
subsidiary of ILX, intends to develop lodging accommodations in areas located
near major university campuses, and to market those lodging accommodations,
including interval ownership interests, to alumni and other sport enthusiasts.
The first Varsity Clubs facility, located near the University of Notre Dame, was
completed in August 1995. Revenues of $513,400, net of related selling costs of
$148,205, were deferred at December 31, 1994 and were recognized in 1995 when
construction was complete. The Company is currently constructing a second
Varsity Club in Tucson, Arizona (Note 5).

The Company acquired approximately one-half acre of improved property, to
be known as the Inn at Los Abrigados, adjacent to Los Abrigados, in September
1996 for a purchase price of $750,000, consisting of a $185,862 cash down
payment and a $564,138 first deed of trust. The Company has made improvements to
the property through late November 1997 when it commenced resort operations.
Vacation Ownership Interest sales are expected to begin in 1998.

NOTE 4 RED ROCK COLLECTION

Red Rock Collection Incorporated, an Arizona corporation ("Red Rock
Collection") was formed to market an exclusive line of skin and hair care
products. Costs were deferred until July 1994, the date at which sales
commenced. Deferred costs of approximately $929,000 were expensed in 1994.

F-11
<PAGE> 98

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTE 5 RESORT PROPERTY UNDER DEVELOPMENT

In July 1995, the Company acquired for $1,002,000 a two-acre parcel in
Tucson, Arizona, near the University of Arizona, to be the site of a second
Varsity Clubs. The Company made a down payment of $300,600 with the remaining
balance of $701,400 financed by a note payable to the seller. Construction of
the facility commenced in 1997 and is expected to be completed in 1998. The
Company has a commitment for construction financing in the amount of $6.55
million (Note 9), which is expected to be sufficient to build and furnish the
property.

NOTE 6 DEFERRED ASSETS

As part of the acquisition of Los Abrigados, certain affiliates of the
Company guaranteed the underlying mortgage on the Resort. As partial
consideration for their guarantee, the affiliates earned a $780,000 fee. The fee
is amortized to expense and was payable to the affiliates at the rate of $100
per Los Abrigados Vacation Ownership Interest sold. At December 31, 1995 and
1996 and September 30, 1997, deferred assets included $359,550, $287,400 and
$220,250, respectively, of guarantee fees, net of accumulated amortization.

As additional consideration for the guarantee, the affiliates were entitled
to receive a percentage of certain amounts held back on the sale of notes
receivable by a financial institution as collateral. The amount was to be paid
as the amounts held back were collected from the financial institution.

NOTE 7 PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996 SEPTEMBER 30, 1997
---------- ----------- ------------------
<S> <C> <C> <C>
Land......................................... $ -- $ 1,658,500 $ 1,658,500
Buildings and improvements................... 2,795,746 3,290,834 3,679,375
Leasehold improvements....................... 500,148 498,198 5,718
Furniture and fixtures....................... 440,202 415,714 553,685
Office equipment............................. 253,444 269,129 299,628
Computer equipment........................... 151,105 156,611 187,837
Vehicles..................................... 26,829 26,829 56,279
----------- ----------- -----------
4,167,474 6,315,815 6,441,022
Accumulated depreciation..................... (992,054) (1,438,348) (1,258,918)
----------- ----------- -----------
$3,175,420 $ 4,877,467 $ 5,182,104
=========== =========== ===========
</TABLE>

In March 1996, the Company, through a subsidiary, became the general
partner of the limited partnership that owns Lomacasi Cottages in Sedona,
Arizona, a 5.27-acre property approximately one mile from Los Abrigados. At
December 31, 1996 and September 30, 1997, property and equipment, net of
accumulated depreciation, includes $2,162,280 and $2,196,612, respectively,
related to Lomacasi Cottages, which serves as collateral for two notes payable
aggregating $2,145,648 at September 30, 1997 (Note 9).

In December 1997, the Company sold its general partner interest in Lomacasi
Cottages to a non-affiliated buyer. In connection with the sale, the Company
received as consideration 100,000 shares of its common stock.

F-12
<PAGE> 99

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTE 8 INCOME TAXES

Deferred income tax assets (liabilities) included in the consolidated
balance sheets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Deferred Tax Assets:
Nondeductible accruals for uncollectible
receivables.................................... $ 805,000 $ 871,000 $ 1,023,000
Tax basis in excess of book on resort property
held for Vacation Ownership Interest sales..... 735,000 494,000 366,000
Deferred startup expenses for tax purposes........ 281,000 270,000 204,000
Intangible assets capitalized for tax purposes.... 24,000 21,000 20,000
Minority interest allocation in excess of tax..... 238,000 270,000 391,000
Alternative minimum tax credit.................... 56,000 121,000 316,000
Net operating loss carryforwards.................. 1,439,000 1,822,000 2,330,000
Other............................................. 39,000 41,000 77,000
----------- ----------- -----------
Total deferred tax assets...................... 3,617,000 3,910,000 4,727,000
----------- ----------- -----------
Deferred Tax Liabilities:
Installment receivable gross profit deferred for
tax purposes................................... (1,628,000) (2,595,000) (3,876,000)
Tax amortization of loan fees in excess of book... (102,000) (136,000) (87,000)
----------- ----------- -----------
Total deferred tax liabilities................. (1,730,000) (2,731,000) (3,963,000)
----------- ----------- -----------
Deferred Income Taxes..................... $ 1,887,000 $ 1,179,000 $ 764,000
=========== =========== ===========
</TABLE>

A reconciliation of the income tax benefit and the amount that would be
computed using statutory federal income tax rates is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------- NINE MONTHS ENDED
1994 1995 1996 SEPTEMBER 30, 1997
---------- --------- --------- -------------------
<S> <C> <C> <C> <C>
Federal, computed on income before minority
interest and income taxes................ $1,165,000 $ 197,000 $ 779,000 $ 619,000
Minority interest.......................... (490,000) (170,000) (191,000) (61,000)
State, computed on income after minority
interest and before income taxes......... 119,000 58,000 91,000 98,000
Deferred tax adjustment.................... -- 128,000 -- --
Decrease in valuation allowance............ (956,000) (760,000) -- --
---------- --------- --------- --------
Income tax expense (benefit)............... $ (162,000) $(547,000) $ 679,000 $ 656,000
========== ========= ========= ========
</TABLE>

The Company reports substantially all Vacation Ownership Interest sales
which it finances on the installment method for Federal income tax purposes.
Under the installment method, the Company does not recognize income on the
financed portion of sales of Vacation Ownership Interests, until the installment
payments on customer receivables are received by the Company or the customer
receivables are sold by the Company. Interest will 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

F-13
<PAGE> 100

ILX RESORTS INCORPORATED AND SUBSIDIARIES

interest expense which would be paid on the deferred taxes related to the
installment method. The amount of interest expense is not estimable as of
September 30, 1997.

The Company is subject to Alternative Minimum Tax ("AMT") as a result of
the deferred income which results from the installment sales treatment of
timeshare sales for regular tax purposes. The AMT liability creates a deferred
tax asset which can be used to offset any future tax liability from regular
Federal income tax. This deferred tax asset has an unlimited carryover period.

In 1994, due to the profitability of Los Abrigados, the improvement in the
Arizona real estate market and the development of tax strategies, which include
the acquisition by Genesis of Vacation Ownership Interests in resort properties
that have historically been sold on a profitable basis, it was concluded that
more likely than not a portion of the Genesis net operating loss ("NOL")
carryforwards and the remainder of Los Abrigados tax benefits would be utilized.
Accordingly, the valuation allowance was reduced in 1994. In 1995, due to the
continued expansion and profitability of Vacation Ownership Interests activity
it was determined that the balance of the Genesis NOL's would be utilized and
the remaining valuation allowance was eliminated.

At December 31, 1996, the Company, excluding Genesis, had NOL carryforwards
of approximately $3,627,000, which expire in 2001 through 2012. At December 31,
1996, Genesis had federal NOL carryforwards of approximately $2,265,000 which
expire in 2008 and state NOL carryforwards of $373,000 which expire in 1998. The
Genesis losses are limited as to usage because they arise from built in losses
of an acquired company and can only be utilized through earnings of Genesis.

In addition, Section 382 of the Internal Revenue 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 occur as a result of
new common stock issuances by the Company or changes occurring as a result of
filings with the Securities and Exchange Commissions on Schedule 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 net operating loss by the Company, which could result in the
Company paying substantial additional federal and state taxes.

NOTE 9 NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Note payable, collateralized by 200,000 shares of
the Company's common stock pledged by an
affiliate, interest at 12%, due through 2002..... $ -- $ -- $ 2,400,000
Note payable, collateralized by consumer notes
receivable and deed of trust on Kohl's Ranch
Lodge, interest at prime plus 4% (12.5% at
September 30, 1997), due through 2003............ 338,849 1,787,228 2,041,232
Construction note payable, collateralized by deed
of trust on VCA-South Bend, interest at 13%, due
through 1998..................................... 4,186,869 2,797,733 2,006,393
</TABLE>

F-14
<PAGE> 101

ILX RESORTS INCORPORATED AND SUBSIDIARIES

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Note payable, collateralized by deed of trust on
Los Abrigados, interest at prime plus 1.25%
(9.75% at September 30, 1997), due through
1999............................................. 805,000 1,572,167 1,625,167
Note payable, collateralized by second deed of
trust on Lomacasi Cottages, interest at 8%
through November 1997, increasing .5% annually
through 1999, due through 2010 (Note 7).......... -- 1,620,658 1,620,658
Construction note payable, collateralized by deed
of trust on VCA-Tucson, interest at 12% plus $100
per annual Tucson Vacation Ownership Interest
sold, due through 2001........................... -- 300,000 1,609,269
Note payable, collateralized by deed of trust on
Kohl's Ranch Lodge, interest at prime plus 4%
(12.5% at September 30, 1997), due through
2000............................................. -- -- 1,419,000
Note payable, collateralized by deed of trust on
Golden Eagle Resort, notes receivable, and an
assignment of the Company's general partnership
interest in LAP, interest at 12%, due through
1998............................................. 1,549,990 1,449,990 1,349,990
Note payable, collateralized by notes receivable
and deed of trust on Golden Eagle Resort,
interest at prime plus 4% (12.5% at September 30,
1997), due through 2002.......................... 1,195,716 1,068,541 1,127,206
Obligations under capital leases with interest at
9.5% to 14.7% (Note 16).......................... 884,498 906,309 766,751
Note payable, collateralized by first deed of trust
on the Inn at Los Abrigados, interest at prime
plus 4% (12.5% at September 30, 1997), due
through 2000..................................... -- 564,138 713,327
Note payable, collateralized by 285 Vacation
Ownership Interests in Los Abrigados, interest at
prime plus 4% (12.5% at September 30, 1997), due
through 2000..................................... -- -- 573,500
Note payable, collateralized by first deed of trust
on Lomacasi Cottages, interest at 12.5%, due
through 2000 (Note 7)............................ -- 536,184 524,990
Note payable, collateralized by VCA-South Bend
consumer notes receivable, interest at prime plus
3.25% (11.75% at September 30, 1997), due through
2003............................................. -- 135,840 320,821
Note payable, collateralized by Los Abrigados
consumer notes receivable, interest at prime plus
5% (13.5% at September 30, 1997), due through
2003............................................. -- 330,953 300,535
Note payable, collateralized by Kohl's Ranch
consumer notes receivable, interest at prime plus
5% (13.5% at September 30, 1997), due through
2003............................................. -- 265,489 269,323
</TABLE>

F-15
<PAGE> 102

ILX RESORTS INCORPORATED AND SUBSIDIARIES

<TABLE>
<CAPTION>
DECEMBER 31,
1995 1996 SEPTEMBER 30, 1997
----------- ----------- -----------
<S> <C> <C> <C>
$500,000 revolving line of credit, unsecured,
interest at prime plus 2% (10.5% at September 30,
1997), due 1998.................................. 145,000 -- 200,000
Note payable, collateralized by second deed of
trust on Kohl's Ranch Lodge, interest at 8%, due
through 2000..................................... 334,800 190,450 179,026
Note payable, collateralized by consumer notes
receivable and deed of trust on Los Abrigados,
interest at prime plus 4% (12.5% at September 30,
1997), due through 1998.......................... 246,828 140,668 84,899
Note payable, collateralized by deed of trust,
interest at 7.375%, due through 2001............. 63,701 54,996 46,850
Note payable, collateralized by deed of trust on
Kohl's Ranch Lodge, interest at prime plus 1.25%
(9.5% at December 31, 1996), repaid in 1997...... 853,500 584,500 --
Note payable, collateralized by contract for sale
on land in Tucson, Arizona, interest at 9.75%,
due through 1998, repaid in 1997................. 701,400 491,981 --
Note payable, interest at 8%, due through 1997..... -- 13,959 --
Other.............................................. 383,794 55,312 71,740
----------- ----------- -----------
$11,689,945 $14,867,096 $ 19,250,677
=========== =========== ===========
</TABLE>

The Company has a $500,000 unsecured revolving line of credit with interest
at prime plus 1.5% (10% at September 30, 1997) which is due in 1998. There were
no amounts outstanding under the line of credit at December 31, 1995, December
31, 1996 or September 30, 1997.

At September 30, 1997, approximately $14.1 million of the Company's notes
payable have scheduled payment terms that may be accelerated based on
established release prices related to future Vacation Ownership Interests sales
or are dependent on the amount of mortgage notes receivable pledged as
collateral. The maturities of these notes are included below based on their
scheduled repayment terms and maturities. Future contractual maturities of notes
payable and capitalized leases at September 30, 1997 are as follows:

<TABLE>
<S> <C>
1997...................................................... $ 854,416
1998...................................................... 5,167,275
1999...................................................... 1,157,046
2000...................................................... 2,373,820
2001...................................................... 1,618,345
2002...................................................... 3,527,206
Thereafter................................................ 4,552,569
-----------
$19,250,677
===========
</TABLE>

F-16
<PAGE> 103

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTE 10 NOTES PAYABLE TO AFFILIATES

Notes payable to affiliates consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996 SEPTEMBER 30, 1997
---------- ---------- ------------------
<S> <C> <C> <C>
Note payable, collateralized by LAP partnership
interest, interest at 8%, due through 2002...... $ -- $ -- $1,300,000
Note payable, collateralized by LAP partnership
interest, interest at 8%, due through 1999...... 927,868 909,078 909,078
Note payable, collateralized by LAP partnership
interest, interest at 8%, due through 2002...... -- -- 675,000
Note payable, collateralized by notes receivable,
interest at 14%, due through 1997............... 266,218 128,209 76,028
Notes payable, collateralized by 122 Vacation
Ownership Interests in Kohl's Ranch Lodge,
interest at 10%, due December 1999, convertible
to common stock at $7.50 per share (Note 15).... 580,000 430,000 150,000
Note payable, unsecured, interest at 10%, due
through 1999, repaid in 1997 (Note 15).......... -- 100,000 --
Other............................................. 63,826 -- --
---------- ---------- ----------
$1,837,912 $1,567,287 $3,110,106
========== ========== ==========
</TABLE>

Future maturities of notes payable to affiliates at September 30, 1997 are
as follows:

Total interest expense on notes payable to affiliates for the years ended
December 31, 1994, 1995 and 1996 and the nine months ended September 30, 1997
was approximately $141,000, $222,000, $158,000 and $108,000, respectively.

NOTE 11 MINORITY INTERESTS

Minority interests consisted primarily of the Company's interests in LAP,
the Arizona limited partnership which owns and operates Los Abrigados. Through
August 1997, the Company held a 78.5% interest in LAP and the 21.5% minority
interest was held by Class B limited partners. In August 1997, the Company
acquired the Class B Limited Partnership Interest in LAP for a purchase price of
$2,920,000 consisting of $820,000 cash, the issuance of 20,000 shares of the
Company's common stock valued at $6.25 per share, and the issuance of promissory
notes in the amounts of $1,300,000 and $675,000 (Note 10).

F-17
<PAGE> 104

ILX RESORTS INCORPORATED AND SUBSIDIARIES

NOTE 12 COMMITMENTS AND CONTINGENCIES

Operating Leases

Future minimum lease payments on noncancelable operating leases at
September 30, 1997 are as follows:

Total rent expense for the years ended December 31, 1994, 1995 and 1996 and
for the nine months ended September 30, 1997, was approximately $449,000,
$490,000, $443,000 and $377,000, respectively.

Legal Proceedings

NOTE 13 SHAREHOLDERS' EQUITY

Preferred Stock

At December 31, 1995 and 1996 and September 30, 1997, preferred stock
includes 66,011, 60,152 and 59,845 shares of the Company's Series A Preferred
Stock carried at $660,110, $601,520 and $598,450, respectively. The Series A
Preferred Stock has a par value and liquidation preference of $10 per share and,
commencing July 1, 1996, is entitled to annual dividend payments of $.80 per
share. Dividends were paid of $47,969 in 1996 and $47,894 for the nine months
ended September 30, 1997. Commencing January 1, 1993, on a quarterly basis, the
Company must contribute $100 per Vacation Ownership Interest sold in Los
Abrigados to a mandatory dividend sinking fund. At September 30, 1997, notes
receivable in the amount of approximately $296,000 have been designated for the
sinking fund. Dividends on the Company's common stock are subordinated to the
Series A dividends and to the contributions required by the sinking fund. The
Company redeemed 5,035 shares of Series A Preferred Stock for $12,000 in 1996.

At December 31, 1995 and 1996 and September 30, 1997, preferred stock
includes 55,000 shares of the Company's Series B Convertible Preferred Stock
carried at $55,000. The Series B Convertible Preferred Stock has a $10 par value
and a liquidation preference of $10 per share, which is subordinate to the
Series A liquidation preference. The Series B Convertible Preferred Stock is not
entitled to dividends. Commencing July 1, 1996, the Series B Convertible
Preferred Stock may be converted into common stock on the basis of two shares of
common for five shares of preferred stock.

Both the Series A and Series B preferred stock may, at the holder's
election, be exchanged for Los Abrigados Vacation Ownership Interests at the
rate of 1,000 shares of stock plus $2,100 cash per Vacation Ownership Interest.
Through September 1996, these shares could also have been exchanged for lodging
certificates under certain conditions.

F-18
<PAGE> 105

ILX RESORTS INCORPORATED AND SUBSIDIARIES

At December 31, 1995 and 1996 and September 30, 1997, preferred stock
includes 290,472, 276,957 and 265,623 shares of the Company's Series C
Convertible Preferred Stock carried at $800,024, $762,723 and $731,441,
respectively. The Series C Convertible Preferred Stock has a $10 par value and
is entitled to dividends at the rate of $.60 per share per annum when declared
by the Board of Directors. If dividends are not declared in any year prior to
the fifth anniversary of the Genesis merger date (November 1, 1993), such
undeclared dividends ("Dividend Arrearage") may be converted to "Cumulation
Shares" at the rate of $6 of Dividend Arrearage per Cumulation Share. The Series
C Preferred Stock and the Cumulation Shares have a liquidation preference of $10
per share and $6 per share, respectively, and are subordinate to the liquidation
preferences of the Series A and Series B stock. Commencing November 1, 1994
through October 31, 2004, the Series C Preferred Stock may be converted to ILX
common stock on the basis of one share of common stock for three shares of
Series C Preferred Stock and one share of ILX common stock for each $30 in
Dividend Arrearages. For the years ended December 31, 1994, 1995 and 1996 and
the nine months ended September 30, 1997, 7,260, 7,524, 13,515 and 11,334 Series
C Convertible shares were exchanged for 2,420, 2,508, 4,505 and 3,778 common
shares, respectively. For the years ended December 31, 1995 and 1996 and the
nine months ended September 30, 1997, 372, 702 and 797 common shares were issued
to exchanging shareholders for their 1995, 1996 and 1997 dividend arrearage,
respectively. ILX may redeem the Series C Preferred Stock commencing November 1,
1996, at $10 per share plus payment of all declared but unpaid dividends.

Common Stock

In February 1994, the Company issued to affiliated minority interest
shareholders 24,600 shares of restricted common stock, valued at $5 per share,
which was at a discount of $2.80 under the approximate market price at the date
of issuance, in exchange for their minority interest in Red Rock Collection.

In March 1994, the Company issued warrants for 20,000 shares of ILX
restricted common stock exercisable at a price of $8.125 per share, the
approximate market value at date of issuance. The warrants were issued in
conjunction with the early collection in March 1994, of a note receivable with a
due date of December 31, 1997, in the amount of $900,000. The warrants expired
without being exercised on June 30, 1997.

During 1995, 4,923 shares of restricted common stock valued at $29,232 were
issued in exchange for services provided to the Company. The stock was valued at
the approximate market price on the date of the agreement.

Effective June 1995, the Company entered into a one-year consulting
agreement for investor relations, broker relations and public relations
services. In exchange for the services to be provided, the Company issued 10,000
shares of restricted common stock in 1995 and 10,000 shares in 1996. The shares
were valued at $5.9375 per share and the cost was recognized over a one-year
period. In addition, during 1995, the Company granted options for 80,000 shares
of common stock at $6.25 per share and 20,000 shares of common stock at $8.125
per share. During 1996, options for 50,000 shares were exercised at $6.25.

In June 1995, the Company issued 24,000 shares of restricted Common Stock
as partial consideration for the acquisition of Kohl's Ranch Lodge.

In June 1997, the Company entered into an agreement with EVEREN Securities,
Inc. ("ESI") for ESI to act as ILX's exclusive financial advisor, investment
banker and agent with respect to evaluation of alternatives to position ILX for
long-term growth and to enhance shareholder value. In exchange for the services,
ILX issued 12,000 shares of ILX common stock on August 1, 1997 and will issue an
additional

F-19
<PAGE> 106

ILX RESORTS INCORPORATED AND SUBSIDIARIES

12,000 shares on February 1, 1998. The shares issued and to be issued have been
valued at $112,500. In accordance with the terms of the agreement, ILX has
registered with the Securities and Exchange Commission the shares issued in
August and will likewise cause the shares to be issued in February to be so
registered. The parties intend for the agreement to remain in effect for a
minimum of one year.

For the years ended December 31, 1995 and 1996 and the nine months ended
September 30, 1997, the Company issued 7,220, 14,500 and 14,200 shares of
restricted common stock valued at $26,837, $52,000 and $39,875, respectively, to
employees in exchange for services provided.

NOTE 14 EMPLOYEE STOCK OPTION PLANS

The Company has Stock Option Plans pursuant to which options (which term as
used herein includes both incentive stock options and non-statutory stock
options) may be granted to key employees, including officers, whether or not
they are directors, and non-employee directors and consultants, who are
determined by the Board of Directors to have contributed in the past, or who may
be expected to contribute materially in the future, to the success of the
Company. The exercise price of the options granted pursuant to the Plans shall
be not less than the fair market value of the shares on the date of grant. All
outstanding stock options require the holder to have been a director or employee
of the Company for at least one year before exercising the option. Options are
exercisable over a five-year period from date of grant if the optionee was a
ten-percent or more shareholder immediately prior to the granting of the option
and over a ten-year period if the optionee was not a ten-percent shareholder.
The aggregate number of shares which may be issued under the Plans shall not
exceed 268,275 shares.

Stock option transactions are summarized as follows:

<TABLE>
<S> <C>
Outstanding at December 31, 1993................................... 32,517
Options exercised................................................ (32,517)
Options granted.................................................. 101,600
Options canceled................................................. (36,000)
------
Outstanding at December 31, 1994................................... 65,600
Options granted.................................................. 110,000
Options canceled................................................. (1,000)
------
Outstanding at December 31, 1995................................... 174,600
Options exercised................................................ (50,000)
Options canceled................................................. (58,600)
------
Outstanding at December 31, 1996................................... 66,000
Options canceled................................................. (5,600)
------
Outstanding at September 30, 1997.................................. 60,400
======
</TABLE>

The exercise price on the options exercised during 1994 was $2.00 per share
for 12,517 shares and $3.425 for 20,000 shares. The exercise price for options
granted in 1995 ranged from $6.25 to $8.125 per share and includes options for
10,000 shares granted to directors, and for options granted in 1994 ranged from
$8.125 to $10.00 per share. The exercise price for options exercised in 1996 was
$6.25 per share for 50,000 shares. The

F-20
<PAGE> 107

ILX RESORTS INCORPORATED AND SUBSIDIARIES

exercise price for options outstanding at September 30, 1997 ranged from $7.50
to $8.125 per share. Options outstanding at September 30, 1997 have expiration
dates as follows:

<TABLE>
<CAPTION>
YEAR ENDING OPTIONS FOR
DECEMBER 31, SHARES
---------------------------------------------------------- -----------
<S> <C>
1999...................................................... 12,500
2000...................................................... 10,000
2004...................................................... 37,900
-----
60,400
=====
</TABLE>

NOTE 15 RELATED PARTY TRANSACTIONS

In addition to the related party transactions described elsewhere in the
financial statements, the Company had the following related party transactions:

The Company leased from affiliates through October 1, 1996, 41 Vacation
Ownership Interests in the Stonehouse at Los Abrigados at the rate of $1,000 per
Vacation Ownership Interest per year. The Company paid $41,000, $41,000 and
$30,750 per year in lease payments to affiliates for the years ended December
31, 1994, 1995 and 1996. The affiliates paid maintenance fees to the Company on
an annual basis for their ownership intervals of $375 per interval in 1994, $650
per interval in 1995 and $714 per interval in 1996.

In December 1994, the Company acquired a condominium adjacent to the Golden
Eagle Resort for $104,915, consisting of cash of $32,643 and the assumption of
the underlying mortgage of $72,272. The condominium is used to house the general
manager of the resort. Vacation Ownership Interests in the property may be
marketed in the future.

In June 1995, an affiliate of the Company purchased twenty-four (24)
one-night intervals in VCA-South Bend for $90,000.

In December 1995, in exchange for modification of the terms of note
payables to affiliates, the Company provided the affiliates with the option to
convert, at maturity, the $580,000 note balances into shares of ILX common stock
at the price of $10 per share (Note 10). In July 1997, the Company issued 36,800
shares of its common stock in exchange for $230,000 of the balance on this note.
In conjunction with the exchange, 100 Vacation Ownership Interests in Los
Abrigados, which secured the note, were released. The stock conversion option
price on the remaining $150,000 note payable balance was reduced from $10 per
share to $7.50 per share.

In December 1995, the Company sold its Red Rock Collection building to an
affiliate for $500,000. The purchase price consisted of a reduction in the
principal balance of the Company's note payable to the affiliate of $320,000 in
December 1995, and, in January 1996, payment by the affiliate of the $180,000
note secured by a deed of trust on the building. The Company leased back the
building for a one-year term, with four one-year options to renew through
December 2000. Rent of $44,000 was paid in 1996 and $36,000 for the nine months
ended September 30, 1997.

In January 1996, an affiliate of the Company agreed to accept a discounted
payment of $60,000 cash and $100,000 in a promissory note as full satisfaction
of a remaining obligation of the Company to such affiliate of $173,225 in
guarantee fees and $44,073 in holdbacks. The note was paid in full in January
1997 (Note 10).

F-21
<PAGE> 108

ILX RESORTS INCORPORATED AND SUBSIDIARIES

In September 1996, the Company purchased from an affiliate twenty Vacation
Ownership Interests in the Stonehouse at Los Abrigados for $260,000.
Subsequently, the affiliate purchased 52 Vacation Ownership Interests in Kohl's
Ranch for $260,000.

The Company sells a significant portion of its notes receivable and has
notes payable in the amount of $6,015,662 at September 30, 1997 to an entity, in
which a member of the Company's Board of Directors is the President and Chief
Operating Officer.

NOTE 16 CAPITAL LEASES

Leased assets included in resort property held for Vacation Ownership
Interest sales and property and equipment totaled $900,150, $1,097,720 and
$1,146,898 (net of accumulated amortization of $227,527, $369,880 and $441,167)
at December 31, 1995 and 1996 and September 30, 1997, respectively. The leases
expire through 2000. Future minimum lease payments at September 30, 1997 are as
follows:

<TABLE>
<S> <C>
1997...................................................... $ 69,936
1998...................................................... 371,500
1999...................................................... 308,458
2000...................................................... 131,506
--------
Total..................................................... 881,400
Less: Amounts representing interest....................... (114,649)
--------
Net minimum lease payments................................ $766,751
========
</TABLE>

NOTE 17 SUBSEQUENT EVENTS

In December 1997, the Company acquired the Roundhouse Resort, an existing
59-unit Vacation Ownership Interests resort with approximately five acres of
developable land located in Pinetop/Lakeside, Arizona. The total consideration
paid by the Company was $700,000.

NOTE 18 QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial information is presented in the following summary.
Revenues include both timeshare and land sale revenues.

<TABLE>
<CAPTION>
1995
----------------------------------------------------
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues....................... $6,857,839 $8,185,738 $8,455,525 $ 9,207,028
Operating income (loss)........ 933,672 1,364,513 487,849 (942,114)
Net income (loss).............. 402,565 644,621 492,913 (915,436)
Net income (loss) per share.... .16 .26 .19 (.35)
</TABLE>

F-22
<PAGE> 109

ILX RESORTS INCORPORATED AND SUBSIDIARIES

<TABLE>
<CAPTION>
1996
----------------------------------------------------
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues....................... $7,472,586 $8,367,012 $8,472,019 $ 7,839,192
Operating income............... 788,308 1,026,305 1,536,058 915,805
Net income..................... 97,548 254,423 498,787 200,358
Net income per share........... .04 .10 .19 .08
</TABLE>

<TABLE>
<CAPTION>
1997
--------------------------------------
THREE MONTHS ENDED
--------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30
---------- ---------- ------------
<S> <C> <C> <C>
Revenues.................................. $7,815,390 $8,965,584 $ 10,010,841
Operating income.......................... 714,647 1,271,352 1,335,128
Net income................................ 106,204 422,823 457,019
Net income per share...................... .04 .16 .17
</TABLE>

The operating loss and net loss in the fourth quarter of 1995 is due
primarily to write-offs of bond offering costs and VCA land deposits and
associated costs.

NOTE 19 CONCENTRATIONS OF RISK

Credit Risk

The Company is exposed to on-balance sheet credit risk related to its notes
receivable. The Company is exposed to off-balance sheet credit risk related to
loans sold under recourse provisions.

The Company offers financing to the buyers of Vacation Ownership Interests
at the Company's resorts. These buyers make a down payment of at least 10% of
the purchase price and deliver a promissory note to the Company for the balance;
the promissory notes generally bear interest at a fixed rate, are payable over a
seven-year period and are secured by a first mortgage on the Vacation Ownership
Interest. The Company bears the risk of defaults on these promissory notes. The
Company performs credit evaluations prior to Vacation Ownership Interest sales.
The Vacation Ownership Interests deed of trust serves as collateral on the note
receivable. If a buyer of a Vacation Ownership Interest defaults, the Company
generally must foreclose on the interest and attempt to resell it; the
associated marketing, selling and administrative costs from the original sale
are not recovered; and such costs must be incurred again to resell the Vacation
Ownership Interest.

Interest Rate Risk

Because the Company's indebtedness bears interest at variable rates and the
Company's customer receivables bear interest at fixed rates, increases in
interest rates could cause the rate on the Company's borrowings to exceed the
rate at which the Company provides financing to its customers. The Company does
not engage in interest rate hedging transactions. Therefore, any increase in
interest rates, particularly if sustained, could have a materially adverse
effect on the Company's results of operations, cash flows and financial
position.

Availability of Funding Sources

The Company funds substantially all of the notes receivable, resort
property held for Vacation Ownership Interest sale and land inventory which it
originates or purchases with sales of consumer notes, borrowings through its
financing facilities and internally generated funds. Borrowings are in turn
repaid with the proceeds

F-23
<PAGE> 110

ILX RESORTS INCORPORATED AND SUBSIDIARIES

received by the Company from sales of notes receivable or from repayments by
consumers of such notes receivable. To the extent that the Company is not
successful in maintaining or replacing existing financings, it would have to
curtail its operations or sell assets, thereby having a material adverse effect
on the Company's results of operations, cash flows and financial condition.

Geographic Concentration

The Company's notes receivable are primarily originated in Arizona and, to
a lesser extent, Indiana. The risk inherent in such concentrations is dependent
upon regional and general economic stability which affects property values and
the financial stability of the borrowers. The Company's resort property held for
Vacation Ownership Interests sales is also concentrated in these states. The
risk inherent in such concentrations is in the continued popularity of the
resort destinations, which affects the marketability of the Company's products
and the collection of notes receivable.

NOTE 20 DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS 107, Disclosures about Fair Value of Financial Instruments, requires
that the Company disclose estimated fair values for its financial instruments.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and cash equivalents

The carrying amount reported in the balance sheet for cash and cash
equivalents approximates their fair value because of the short maturity of these
instruments.

Notes receivable

The carrying amount reported in the balance sheet for notes receivable
approximates its fair value because the interest rates on the portfolio of notes
receivable approximate current interest rates to be received on similar current
notes receivable.

Notes payable

The carrying amount reported in the balance sheet for notes payable
approximates its fair value because the interest rates on these instruments
approximate current interest rates charged on similar current borrowings.

Notes payable to affiliates

The fair value of the notes payable to affiliates is not determinable since
these financial instruments are not readily marketable and are payable to
affiliates.

F-24
<PAGE> 111

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

No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus, and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or the Underwriter. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances, create any
implication that the information herein is correct as of any time subsequent to
the date hereof or that there has been no change in the affairs of the Company
since such date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 18
Use of Proceeds............................ 29
Price Range of Common Stock................ 29
Dividend Policy............................ 30
Capitalization............................. 31
Selected Consolidated Historical and Pro
Forma Financial Information.............. 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 39
Business................................... 47
Management................................. 70
Certain Relationships and Related
Transactions............................. 76
Principal Shareholders..................... 78
Description of ILX Securities and Pertinent
Arizona Statutes......................... 80
Underwriting............................... 83
Legal Matters.............................. 84
Experts.................................... 84
Additional Information..................... 84
Consolidated Financial Statements.......... F-1
</TABLE>

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

PROSPECTUS , 1998
- ------------------------------------------------------

[ILX LOGO]

ILX Resorts Incorporated
Common Stock

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

EVEREN Securities, Inc.

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

<PAGE> 112

PART II TO FORM S-1

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses incurred by the
Registrant in connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions. All amounts shown
are estimates except for the Securities and Exchange Commission registration fee
and the NASD and Nasdaq filing fee.

<TABLE>
<S> <C>
SEC Registration Fee................................................ $6,785
NASD Filing Fee..................................................... $
[Nasdaq] Listing Fee................................................ $
Accounting Fees and Expenses........................................ $
Legal Fees and Expenses............................................. $
Printing, Engraving and Mailing Expenses............................ $
Miscellaneous....................................................... $
-------
-
Total..................................................... $
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Articles 13 and 14 of ILX's Articles of Incorporation, as amended (the
"Articles of Incorporation") under certain circumstances, provide for the
indemnification of ILX's officers and directors against liabilities they may
incur in such capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but that description is
qualified in its entirety by reference to Articles 13 and 14 of ILX's Articles
of Incorporation.

II-1
<PAGE> 113

such determination, indemnification is mandatory unless the person seeking
indemnification unreasonably shall refuse to permit the Company, at its own
expense and through counsel of its choosing, to defend him or her in the subject
action.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the period commencing January 1, 1995, the Company sold or issued
the securities listed below without registration under the Securities Act of
1933, as amended.

In June 1995, the Company issued 24,000 shares of restricted Common Stock
as partial consideration for the acquisition of Kohl's Ranch Lodge.

In July 1995, the Company issued options to purchase up to 5,000 shares of
Common Stock to two of its nonemployee directors at an exercise price of $7.50
per share, as consideration for their service to the Company. Effective January
23, 1998, the exercise price of these options was changed to $6.25 per share in
order to be consistent with similar options granted to the Company's other
non-employee directors.

Effective June 1995, the Company entered into a one-year consulting
agreement for investor relations, broker relations and public relations
services. In exchange for the services to be provided, the Company issued 10,000
shares of restricted common stock in 1995 and 10,000 shares in 1996. The shares
were valued at $5.9375 per share. In addition, during 1995, the Company granted
options for 80,000 shares of Common Stock at $6.25 per share and 20,000 shares
of common stock at $8.125 per share.

In January 1997, the Company entered into a new one-year consulting
agreement for financial and business advisory services. In exchange for the
services to be provided, the Company granted options to purchase up to 100,000
shares of Common Stock. These options were assumed, effective as of the initial
grant, by an affiliate of the Company and have since expired without exercise.

Also in January 1997, the Company entered into a separate six-month
consulting agreement. In exchange for the services to be provided, the Company
granted options to purchase up to 100,000 shares of Common Stock at an exercise
price of $6.25 per share. These options were assumed, effective as of the
initial grant, by an affiliate of the Company and have since expired without
exercise.

In June 1997, the Company entered into an exclusive agreement for financial
advisory, investment banking and agency services. In exchange for these
services, the Company issued 12,000 shares of Common Stock on August 1, 1997 and
is obligated to issue an additional 12,000 shares on February 1, 1998. The
shares issued in August 1997 have been registered for resale and the Company is
obligated to also register for resale the shares to be issued in February 1998.

In August 1997, the Company issued 20,000 shares of restricted Common Stock
valued at $6.25 per share in conjunction with the acquisition of the Class B
Limited Partnership Interest in LAP.

Effective January 23, 1998, the Company issued options to purchase up to
5,000 shares of Common Stock to two of its non-employee directors at an exercise
price of $6.25 per share, as consideration for their services to the Company.

In each of the years ended December 31, 1995, 1996 and 1997, the Company
granted 7,220, 14,500 and 17,240 shares of restricted Common Stock valued at
$26,837, $52,000 and $56,975, respectively, to employees and directors of ILX in
exchange for services provided.

Unless otherwise noted herein, the issuances of securities in the
transactions described above were deemed to be exempt from registration under
the Act either pursuant to the exemption from registration contained in Section
3(a)(9) and Section 4(2) thereof, or under the provisions of Regulation D or
Rule 701 promulgated under the Act. Such sales were made solely to investors who
represented that they were

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<PAGE> 114

accredited investors and to not more than 35 non-accredited investors, all of
whom purchased such securities for investment and not with a view to the
distribution thereof. All sales were made without any general solicitation or
general advertising. Restrictions have been imposed on the resale of such
securities, including the placement of legends thereon noting such restrictions,
and written disclosure of such restrictions were made prior to issuance of the
securities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
1 Form of Underwriting Agreement................................... *
3(i).1 Articles of Incorporation of International Leisure Enterprises
Incorporated, filed October 8, 1986.............................. **
3(i).2 Articles of Amendment to the Articles of Incorporation of
International Leisure Enterprises Incorporated, filed August 31,
1987............................................................. **
3(i).3 Articles of Amendment to the Articles of Incorporation of
International Leisure Enterprises Incorporated, filed October 19,
1987............................................................. **
3(i).4 Articles of Amendment to the Articles of Incorporation of
International Leisure Enterprises Incorporated, filed May 3,
1990............................................................. **
3(i).5 Articles of Amendment to the Articles of Incorporation of
International Leisure Enterprises Incorporated (Changed by this
Amendment to ILX Incorporated), filed June 28, 1993.............. **
3(i).6 Certificate of Amendment to Articles of Incorporation, filed
January 12, 1998................................................. ***
3(i).7 Articles of Correction, filed January 22, 1998, to correct
Certificate of Amendment to Articles of Incorporation, dated
January 12, 1998................................................. ***
3(i).8 Certificate of Designation, Preferences, Rights, and Limitations
of Series A Preferred Stock, $10.00 par value of International
Leisure Enterprises Incorporated, filed September 5, 1991........ **
3(i).9 Certificate of Designation, Preferences, Rights, and Limitations
of Series B Preferred Stock, $10.00 par value of International
Leisure Enterprises Incorporated, filed September 5, 1991........ **
3(i).10 Certificate of Designation of Series C Preferred Stock, filed
April 30, 1993................................................... **
3.(ii) Amended and Restated Bylaws of International Leisure Enterprises
Incorporated, dated October 26, 1987............................. **
4 Form of Common Stock Certificate................................. *
5 Legal Opinion of Squire, Sanders & Dempsey L.L.P................. ***
10.1 Form of Stock Option Agreement between International Leisure
Enterprises Incorporated and Option Holder....................... **
10.2 1992 Stock Option Plan........................................... **
10.3 1995 Stock Option Plan........................................... **
10.4 Agreement and Plan of Merger among ILE Acquisition Corporation,
International Leisure Enterprises Incorporated and Genesis
Investment Group, Inc., dated March 15, 1993..................... **
10.5 First Amendment to Agreement and Plan of Merger between ILE
Acquisition Corporation, International Leisure Enterprises
Incorporated and Genesis Investment Group, Inc., dated April 22,
1993............................................................. **
10.6 Agreement among ILX Incorporated, Martori Enterprises
Incorporated, Los Abrigados Partners Limited Partnership, Red
Rock Collection Incorporated, Edward John Martori and Joseph P.
Martori as Trustee for Cynthia J. Polich Irrevocable Trust dated
December 29, 1995................................................ **
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.7 Lease Agreement between Edward John Martori and Red Rock
Collection Incorporated, dated December 29, 1995................. **
10.8 First Amended Certificate of Limited Partnership and Amended
Agreement of Los Abrigados Partners Limited Partnership, dated
September 9, 1991................................................ **
10.9 Certificate of Amendment of Limited Partnership for Los Abrigados
Partners Limited Partnership, dated November 11, 1993............ **
10.10 Certificate of Amendment of Limited Partnership for Los Abrigados
Partners Limited Partnership, dated July 1, 1994................. **
10.11 First Amendment to Amended Agreement of Los Abrigados Partners
Limited Partnership, dated February 9, 1996...................... **
10.12 Loan Agreement ($1,000,000) between The Steele Foundation, Inc.,
ILX Incorporated and Los Abrigados Partners Limited Partnership,
dated July 21, 1993.............................................. **
10.13 Second Modification Agreement between ILX Incorporated, Los
Abrigados Partners Limited Partnership, ILE Sedona Incorporated,
and The Steele Foundation, Inc., dated December 20, 1994......... **
10.14 Assignment of Beneficial Interest under Promissory Note, Deed of
Trust and Title Policy to Daniel Cracchiolo as Personal
Representative of the Estate of Ethel Steele by Genesis
Investment Group, Inc., dated June 17, 1994...................... **
10.15 Continuing Guaranty to Daniel Cracchiolo as Personal
Representative of the Estate of Ethel Steele by ILX Incorporated,
dated June 17, 1994.............................................. **
10.16 Purchase and Sale Agreement between Edward J. Martori, Martori
Enterprises Incorporated, Jerome M. White, Guadalupe Iniquez (as
Trustee), Wedbush Morgan Securities (IRA), and Joseph P. Martori
(as Trustee) and ILX Incorporated, dated July 1, 1994............ **
10.17 Installment Promissory Note ($1,000,000) to Edward J. Martori by
ILX Incorporated, dated July 1, 1994............................. **
10.18 Installment Promissory Note ($100,000) to Martori Enterprises
Incorporated by ILX Incorporated, dated July 1, 1994............. **
10.19 Guarantee Fee Agreement between Los Abrigados Partners Limited
Partnership and Arthur J. Martori and Alan R. Mishkin, dated
September 9, 1991................................................ **
10.20 License Agreement between Los Abrigados Partners Limited
Partnership and those certain participants, dated September 1,
1991............................................................. **
10.21 Promissory Note ($900,000) to Cynthia J. Polich Irrevocable Trust
and Edward John Martori by Los Abrigados Partners Limited
Partnership and ILX Incorporated, dated July 27, 1995............ **
10.22 Deed of Trust and Assignment of Rents to Cynthia J. Polich
Irrevocable Trust and Edward John Martori by Los Abrigados
Partners Limited Partnership, dated July 27, 1995................ **
10.23 Real Estate Purchase Contract between Indian Wells Partners,
Ltd., Los Abrigados Partners Limited Partnership and
International Leisure Enterprises Incorporated, dated December
18, 1992......................................................... **
10.24 Option Agreement between Indian Wells Partners, Ltd. and Martori
Enterprises Incorporated, dated March 31, 1994................... **
10.25 Assignment of Option by Martori Enterprises Incorporated to
Genesis Investment Group, Inc., dated September 15, 1994......... **
10.26 Lease Agreement between Indian Wells Partners, Ltd. and Los
Abrigados Partners Limited Partnership, dated December 21,
1992............................................................. **
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.27 Second Amendment to Lease Agreement between Indian Wells
Partners, Ltd. and Los Abrigados Partners Limited Partnership,
dated March 31, 1994............................................. **
10.28 Loan Agreement ($5,000,000) between The Valley National Bank and
Los Abrigados Partners Limited Partnership, dated September 9,
1991............................................................. **
10.29 Modification Agreement ($5,000,000) between Bank One, Arizona, NA
and Los Abrigados Partners Limited Partnership, dated October 22,
1993............................................................. **
10.30 Second Modification Agreement ($5,000,000) between Bank One,
Arizona, NA and Los Abrigados Partners Limited Partnership, dated
October 4, 1994 additional advance including repayment of prior
$750,000 loan)................................................... **
10.31 Third Modification Agreement ($5,000,000) between Bank One,
Arizona, NA and Los Abrigados Partners Limited Partnership, dated
January 25, 1996 (additional advance)............................ **
10.32 Secured Promissory Note ($2,485,000) to Bank One, Arizona, NA by
Los Abrigados Partners Limited Partnership, dated January 25,
1996............................................................. **
10.33 Letter of Commitment between Tammac Financial Corp. and Los
Abrigados Partners Limited Partnership, dated July 20, 1994...... **
10.34 Financing Agreement between Tammac Financial Corp. and Los
Abrigados Partners Limited Partnership, dated September 10,
1991............................................................. **
10.35 Amendment to Commitment Letter, Financing Agreement and
Reaffirmation of Various Loan Documents between Tammac Financial
Corp., Los Abrigados Partners Limited Partnership and
International Leisure Enterprises Incorporated, dated March 31,
1993............................................................. **
10.36 Third Amendment to Financing Agreement between Tammac Financial
Corp. and Los Abrigados Partners Limited Partnership, dated
September 7, 1994................................................ **
10.37 Amended and Restated Continuing Guaranty to Tammac Financial
Corporation by ILX Incorporated, dated September 7, 1994......... **
10.38 Loan and Security Agreement between Tammac Financial Corp. and
Los Abrigados Partners Limited Partnership, dated September 7,
1994............................................................. **
10.39 Promissory Note ($499,859.15) to Tammac Financial Corp. by Los
Abrigados Partners Limited Partnership, dated September 7,
1994............................................................. **
10.40 Contract of Sale of Membership Agreements and Installment
Purchase Agreements with Recourse between Resort Funding, Inc.
and Los Abrigados Partners Limited Partnership, dated September
14, 1993......................................................... **
10.41 Management Agreement between Bennett Funding International, Ltd.
and Los Abrigados Partners Limited Partnership, ILE Sedona
Incorporated, and ILX Incorporated dated November 21, 1995 (Los
Abrigados Resort)................................................ **
10.42 Promissory Note to Firstar Metropolitan Bank and Trust from Los
Abrigados Partners Limited Partnership, dated November 8, 1993... **
10.43 Change in Terms Agreement ($400,000) between Los Abrigados
Partners Limited Partnership and Firstar Metropolitan Bank and
Trust, dated November 8, 1994.................................... **
10.44 Change in Terms Agreement ($400,000) between Los Abrigados
Partners Limited Partnership and Firstar Metropolitan Bank and
Trust, dated November 8, 1995.................................... **
10.45 Agreement for Purchase and Sale of Kohl's Ranch between Kohl's
Ranch Associates and ILX Incorporated, dated March 10, 1995
(Kohl's Ranch)................................................... **
10.46 Promissory Note ($367,750) to Kohl's Ranch Associates by ILX
Incorporated, dated June 1, 1995 (Kohl's Ranch).................. **
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.47 Fourth Modification Agreement and Assumption Agreement between
Bank One, Arizona, NA and ILX Incorporated dated June 1, 1995
(Kohl's Ranch)................................................... **
10.48 Letter of Commitment between Tammac Financial Corp. and ILX
Incorporated, dated June 19, 1995 (Kohl's Ranch)................. **
10.49 Promissory Note ($10,000,000) to Tammac Financial Corp. by ILX
Incorporated, dated August 25, 1995 (Kohl's Ranch)............... **
10.50 Loan and Security Agreement between Tammac Financial Corp. and
ILX Incorporated, dated August 25, 1995 (Kohl's Ranch)........... **
10.51 Letter of Commitment between Tammac Financial Corp. and ILX
Incorporated, dated July 20, 1994 (Golden Eagle Resort).......... **
10.52 Loan and Security Agreement between Tammac Financial Corp. and
ILX Incorporated, dated September 7, 1994 (Golden Eagle
Resort).......................................................... **
10.53 Promissory Note ($2,000,000) to Tammac Financial Corp. by ILX
Incorporated, dated September 7, 1994 (Golden Eagle Resort)...... **
10.54 Amended and Restated Financing Agreement between Tammac Financial
Corp. and ILX, Inc. Incorporated, dated September 7, 1994 (Golden
Eagle Resort).................................................... **
10.55 Option Agreement between Imperial Properties and ILX
Incorporated, dated July 25, 1994................................ **
10.56 Joint Venture Agreement between Chanen Development Company, Inc.
and ILE Sedona Incorporated, dated September 28, 1994............ **
10.57 First Amended Certificate of Limited Partnership and Amended
Agreement of The Sedona Real Estate Limited Partnership #1, dated
March 1, 1996 (Lomacasi Resort).................................. **
10.58 Letter Agreement dated February 27, 1996 (Lomacasi Resort)....... **
10.59 Letter of Commitment between Bennett Funding International, Ltd.
and VCA South Bend Incorporated, dated August 18, 1994........... **
10.60 Construction Loan Agreement ($5,000,000) between Bennett Funding
International, Ltd. and VCA South Bend Incorporated, dated
October 4, 1994.................................................. **
10.61 Construction Promissory Note ($5,000,000) to Bennett Funding
International, Ltd. by VCA South Bend Incorporated, dated October
4, 1994.......................................................... **
10.62 Guaranty and Subordination Agreement (Construction Loan) to
Bennett Funding International, Ltd. by ILX Incorporated, dated
August 18, 1994.................................................. **
10.63 Contract of Sale of Timeshare Receivables with Recourse between
Bennett Funding International, Ltd. and VCA South Bend
Incorporated, dated August 18, 1994.............................. **
10.64 Guaranty and Subordination Agreement (Receivables Financing) to
Bennett Funding International, Ltd. by ILX Incorporated, dated
August 18, 1994.................................................. **
10.65 Articles of Limited Partnership between Hotel Syracuse Timeshare
Corporation and Syracuse Project Incorporated, dated August 15,
1995............................................................. **
10.66 Agreement of Purchase and Sale of Real Property, Improvements and
Associated Personalty between Hotel Syracuse, Inc. and Orangemen
Club Limited Partnership, dated September 12, 1995............... **
10.67 Letter of Commitment between Resort Service Company, Inc. and
Orangemen Club Limited Partnership, dated August 9, 1995......... **
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.68 Service Agreement between Hotel Syracuse, Inc. and Orangemen Club
Limited Partnership, dated September 12, 1995.................... **
10.69 Loan Agreement ($500,000) between Bank One, Arizona, NA and ILX
Incorporated, dated October 4, 1994.............................. **
10.70 Modification Agreement ($500,000) between Bank One, Arizona, NA
and ILX Incorporated, dated October 4, 1995...................... **
10.71 Promissory Note ($500,000) to Bank One, Arizona, NA by ILX
Incorporated, dated October 4, 1994.............................. **
10.72 Consulting Agreement between Investor Resource Services, Inc. and
ILX Incorporated, dated January 1, 1997.......................... **
10.73 Consulting Agreement between Universal Solutions, Inc. and ILX
Incorporated..................................................... **
10.74 Security Agreement between Los Abrigados Partners Limited
Partnership and The Valley National Bank of Arizona, dated
September 9, 1991................................................ *
10.75 Assignment of Management Agreement between Los Abrigados Partners
Limited Partnership and The Valley National Bank of Arizona,
dated September 9, 1991.......................................... *
10.76 Secured Promissory Note ($5,000,000) to The Valley National Bank
of Arizona by Los Abrigados Partners Limited Partnership, dated
September 9, 1991................................................ *
10.77 Deed of Trust to The Valley National Bank of Arizona by Los
Abrigados Partners Limited Partnership, dated September 9,
1991............................................................. *
10.78 Collateral Assignment (and Financing Statement) to The Valley
National Bank of Arizona by Los Abrigados Partners Limited
Partnership, September 9, 1991 (Los Abrigados Resort)............ *
10.79 New Loan Agreement ($750,000) to Los Abrigados Partners Limited
Partnership by The Valley National Bank of Arizona............... *
10.80 Letter Agreement between Los Abrigados Partners Limited
Partnership and The Valley National Bank of Arizona, dated April
8, 1994.......................................................... *
10.81 Modification Agreement between Los Abrigados Partners Limited
Partnership and The Valley National Bank of Arizona, dated June
28, 1994......................................................... *
10.82 Fourth Modification Agreement ($800,000) between Los Abrigados
Partners Limited Partnership and The Valley National Bank of
Arizona, dated September 3, 1997................................. *
10.83 Repayment Guaranty to The Valley National Bank of Arizona by ILX
Inc., dated October 4, 1994...................................... *
10.84 Repayment Guaranty to The Valley National Bank of Arizona by ILX,
dated January 25, 1996........................................... *
10.85 Memorandum of Modification, dated September 3, 1997.............. *
10.86 Deed of Trust to Firstar Metropolitan Bank & Trust by Los
Abrigados Partners Limited Partnership, dated November 8, 1993... *
10.87 Commercial Guaranty to Firstar Metropolitan Bank & Trust by ILX,
Inc.............................................................. *
10.88 Change in Terms of Agreement between Los Abrigados Partners
Limited Partnership and Firstar Metropolitan Bank & Trust, dated
November 8, 1994................................................. *
10.89 Change in Terms of Agreement between Los Abrigados Partners
Limited Partnership and Firstar Metropolitan Bank & Trust, dated,
September 20, 1996............................................... *
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.90 Change in Terms of Agreement between Los Abrigados Partners
Limited Partnership and Firstar Metropolitan Bank & Trust, dated,
September 25, 1997............................................... *
10.91 Promissory Note ($4,000,000) to Firstar Metropolitan Bank & Trust
by ILX, dated October 28, 1997................................... *
10.92 Deed of Trust between ILX, Inc. and Firstar Metropolitan Bank &
Trust, dated October 28, 1997.................................... *
10.93 Junior Deed of Trust, Assignment of Rents, and Security Agreement
among ILX, Inc., First American Title Insurance Company and
Kohl's Ranch Associates, dated June 1, 1995...................... *
10.94 Secured Line of Credit Lending Agreement between ILX, Inc., Los
Abrigados Partners Limited Partnership, ILE Sedona Inc. and
Litchfield Financial Corporation, dated April 9, 1996............ *
10.95 Secured Line of Credit Promissory Note ($2,000,000) to Litchfield
Financial Corporation by Los Abrigados Partners Limited
Partnership, ILE Sedona Inc., dated April 9, 1996................ *
10.96 First Amendment to Secured Line of Credit Lending Agreement,
dated July 29, 1996.............................................. *
10.97 Second Amendment to Secured Line of Credit Lending Agreement,
dated January 10, 1997........................................... *
10.98 Pledge and Security Agreement between Los Abrigados Partners
Limited Partnership, ILE Sedona Inc. and Litchfield Financial
Corporation, dated April 9, 1996................................. *
10.99 Collateral Assignment of Certain Promissory Notes to Litchfield
Financial Corporation by Los Abrigados Partners Limited
Partnership, ILE Sedona Inc., dated April 9, 1996................ *
10.100 Secured Construction Loan Agreement ($750,000) between Litchfield
Financial Corporation and ILX, Inc., dated September 13, 1996.... *
10.101 Receivables Sale and Purchase Agreement between ILX, Inc. and
Litchfield Financial Corporation, dated February 19, 1997........ *
10.102 Secured Construction Promissory Note ($750,000) to Litchfield
Financial Corporation by ILX, Inc., dated September 13, 1996..... *
10.103 Pledge and Security Agreement between Litchfield Financial
Corporation and ILX, Inc., dated September 13, 1996.............. *
10.104 Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing, dated September 13, 1996......................... *
10.105 First Amendment to Deed of Trust between Litchfield Financial
Corporation and ILX, Inc., dated February 19, 1997............... *
10.106 Collateral Assignment of Deed of Trust and Note by Litchfield
Financial Corporation to Bank of Scotland, dated January 2,
1997............................................................. *
10.107 Amended and Restated Promissory Note............................. *
10.108 Amendment to Collateral Assignment of Deed of Trust and Note
($20,000,000), dated April 7, 1997............................... *
10.109 First Amendment to Deed of Trust, dated February 19, 1997........ *
10.110 Assignment of Mortgages to Litchfield Financial Corporation by
the Bank of Scotland, dated September 25, 1997................... *
10.111 Secured Line of Credit Lending Agreement between ILX, Inc. and
Litchfield Financial Corporation, dated June 27, 1997............ *
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.112 Secured Line of Credit Promissory Note ($5,000,000) to Litchfield
Financial Corporation by ILX, Inc., dated June 27, 1997.......... *
10.113 Secured Term Promissory Note ($1,500,000) to Litchfield Financial
Corporation by ILX, Inc., dated June 27, 1997.................... *
10.114 Amendment to Secured Line of Credit Lending Agreement, Secured
Line of Credit Promissory Note and Secured Term Promissory Note,
dated June 27, 1997.............................................. *
10.115 Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing between ILX, Inc., Heartsill Ragon III and
Litchfield Financial Corporation, dated June 27, 1997............ *
10.116 Amendment to Deed of Trust to Litchfield Financial Corporation by
ILX, Inc., dated June 27, 1997................................... *
10.117 Absolute and Unconditional Assignment of Deed of Trust to
Litchfield Financial Corporation by ILX, Inc., dated June 27,
1997............................................................. *
10.118 Absolute Assignment of Leases and Rents by ILX, Inc. to
Litchfield Financial Corporation, dated June 27, 1997............ *
10.119 Pledge and Security Agreement between Litchfield Financial
Corporation and ILX, Inc., dated June 27, 1997................... *
10.120 Acknowledgement, Consent and Subordination Agreement between
Kohl's Ranch Associates, Tammac Financial Corporation and
Litchfield Financial Corporation, dated June 27, 1997............ *
10.121 Collateral Assignment of Management, Marketing and Other
Contracts to Litchfield Financial Corporation by ILX, Inc., dated
June 27, 1997.................................................... *
10.122 Credit Terms and Conditions Agreement between ILX, Inc. and
Imperial Bank, Arizona, dated December 30, 1997.................. *
10.123 Promissory Note ($1,000,000) to Imperial Bank, Arizona by ILX,
Inc., dated December 29, 1997.................................... *
10.124 Assignment of Indebtedness and Loan Documents by Tammac Financial
Corporation to Steele Foundation, Inc., dated July 21, 1993...... *
10.135 Assignment of Beneficial Interest under Deed of Trust to Steele
Foundation, Inc. by Tammac Financial Corporation, dated July 21,
1993............................................................. *
10.136 Promissory Note/Collateral Assignment Modification Agreement,
dated July 21, 1993 (includes ILE Sedona)........................ *
10.127 Financing Statement between Steele Foundation, Inc. and ILX, Inc.
and Los Abrigados Partners Limited Partnership, dated July 21,
1993............................................................. *
10.128 Assignment of Deeds of Trust by Los Abrigados Partners Limited
Partnership to Steele Foundation, Inc., dated July 21, 1993...... *
10.129 Assignment of Contract Rights and Accounts Collateral by Los
Abrigados Partners Limited Partnership to Steele Foundation,
Inc., dated July 21, 1993........................................ *
10.130 Blanket Assignment by Los Abrigados Partners Limited Partnership
to Steele Foundation, Inc., dated July 21, 1993.................. *
10.131 UCC Financing Statement by Los Abrigados Partners Limited
Partnership...................................................... *
10.132 Second Modification Agreement between Steele Foundation, Inc. and
ILX, Inc., Los Abrigados Partners Limited Partnership, ILE Sedona
Inc., dated December 20, 1994.................................... *
10.133 Second Amendment to Deed of Trust, Security Agreement and
Financing Statement, dated January 12, 1995...................... *
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.134 Acquisition and Development Loan Agreement between Bennett
Funding International Ltd. and VCA Tucson Inc., dated October 20,
1995............................................................. *
10.135 Promissory Note ($6,000,000) to Bennett Funding International
Ltd. by VCA Tucson Inc., dated October 20, 1995.................. *
10.136 Mortgage and Security Agreement and UCC-1 Financing Statement to
Bennett Funding International Ltd., dated October 20, 1995....... *
10.137 First Amendment to the Acquisition & Development Loan Agreement
by Bennett Funding International Ltd., VCA Tucson Inc. and ILX,
Inc., dated June 15, 1997........................................ *
10.138 First Amendment to the Acquisition & Development Promissory Note
by Bennett Funding International Ltd., VCA Tucson Inc. and ILS,
Inc., dated June 15, 1997........................................ *
10.139 First Amendment to the Mortgage and Security Agreement and UCC-1
Financing Statement by VCA Tucson Inc., dated June 15, 1997...... *
10.140 Contract of Sale and Timeshare Receivables with Recourse between
VCA Tucson Inc. and Bennett Funding International Ltd., dated
October 20, 1995................................................. *
10.141 First Amendment to the Contract of Sale of Timeshare Receivables
with Recourse by VCA Tucson Inc. and Bennett Funding
International Ltd................................................ *
10.142 Guaranty and Subordination Agreement between ILX, Inc. and
Bennett Funding International Ltd., dated October 20, 1995....... *
10.143 Mortgage and Security Agreement between VCA Tucson Inc. and
Bennett Funding International Ltd., dated October 4, 1994........ *
10.144 Interim Loan Agreement between VCA South Bend, Inc. and Bennett
Funding International Ltd., dated March 31, 1995................. *
10.145 Promissory Note ($2,000,000) to Bennett Funding International
Ltd. by VCA South Bend, Inc., dated March 31, 1995............... *
10.146 Collateral Assignments of Receivables to Bennett Funding
International Ltd. by VCA South Bend, Inc., dated March 31,
1995............................................................. *
10.147 Mortgage and Security Agreement filed October 13, 1994........... *
10.148 Amendment to Mortgage and Security Agreement by VCA South Bend,
Inc. and Bennett Funding International Ltd., dated March 31,
1995............................................................. *
10.149 Guaranty and Subordination Agreement between Bennett Funding
International Ltd. and ILX, Inc., dated October 4, 1993.......... *
10.150 Deed of Trust by ILX, Inc. in favor of Resort Funding, Inc....... *
10.151 Deed of Trust Equal Priority Agreement between Tammac Financial
Corporation and Resort Funding, Inc., dated September 14, 1993... *
10.152 Mortgage and Security Agreement to Bennett Funding International
Ltd. by VCA South Bend, Inc., dated October 4, 1994.............. *
10.153 Contract of Sale of Timeshare Receivables with Recourse between
Bennett Funding International Ltd. and VCA South Bend, Inc.,
dated October 4, 1994............................................ *
10.154 Guaranty and Subordination Agreement between Bennett Funding
International Ltd. and ILX, Inc., dated October 4, 1993.......... *
10.155 Settlement Agreement between Resort Funding, Inc., Los Abrigados
Partners Limited Partnership, ILE Sedona, ILX, Inc. and Martori
Enterprises Inc., dated June 15, 1997............................ *
</TABLE>

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<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.156 Promissory Note ($2,400,000) by Los Abrigados Partners Limited
Partnership, ILE Sedona Inc., and ILX, Inc. to Resort Funding,
Inc., dated June 15, 1997........................................ *
10.157 Guaranty by ILE Sedona Inc. of Payment under the Settlement
Agreement to Resort Funding, Inc., dated June 15, 1997........... *
10.158 Guaranty by ILX, Inc. of Payment under the Settlement Agreement
to Resort Funding, Inc., dated June 15, 1997..................... *
10.159 Guaranty by Los Abrigados Partners Limited Partnership of Payment
under the Settlement Agreement to Resort Funding, Inc., dated
June 15, 1997.................................................... *
10.160 Acquisition and Development Loan Agreement between Resort
Funding, Inc. and ILX, Inc., dated December 12, 1997............. *
10.161 Acquisition and Development Promissory Note ($700,000) to Resort
Funding, Inc. by ILX, Inc., dated December 12, 1997.............. *
10.162 Deed of Trust and Assignment of Rents to Resort Funding, Inc. by
ILX, Inc., dated December 12, 1997............................... *
10.163 Secured Promissory Note ($770,000) by Los Abrigados Partners
Limited Partnership to Martori Enterprises, Inc. dated August 31,
1992............................................................. *
10.164 Assignment of Deeds of Trust to Martori Enterprises Inc. by Los
Abrigados Partners Limited Partnership, dated August 31, 1992.... *
10.165 Secured Promissory Note ($200,000) to Martori Enterprises Inc. by
Los Abrigados Partners Limited Partnership, dated February 16,
1993............................................................. *
10.166 Financing and Security Agreement between Martori Enterprises Inc.
and Los Abrigados Partners Limited Partnership, dated February
16, 1993......................................................... *
10.167 Assignment of Deeds of Trust by Los Abrigados Partners Limited
Partnership to Martori Enterprises Inc., dated February 16,
1993............................................................. *
10.168 Secured Promissory Note ($150,000) by ILX, Inc. to Martori
Enterprises Inc., dated May 15, 1993............................. *
10.169 Financing and Security Agreement between ILX, Inc. and Martori
Enterprises Inc., dated May 15, 1993............................. *
10.170 Assignment of Deeds of Trust by ILX, Inc. to Martori Enterprises
Inc., dated May 15, 1993......................................... *
10.171 Agreement for Transfer of Limited Partnership Interest between
ILX, Inc. and Martori Enterprises Inc., dated August 8, 1997..... *
10.172 Installment Promissory Note ($1,300,000) by ILX, Inc. to Martori
Enterprises Inc., dated August 8, 1997........................... *
10.173 Security Agreement between ILX, Inc. and Martori Enterprises
Inc., dated August 8, 1997....................................... *
10.174 Installment Promissory Note ($909,078) by ILX, Inc. to Edward J.
Martori, dated January 1, 1996................................... *
10.175 Promissory Note ($230,000) by Los Abrigados Partners Limited
Partnership and ILX, Inc. to Edward J. Martori, dated January 1,
1996............................................................. *
10.176 Promissory Note ($250,000) by Los Abrigados Partners Limited
Partnership and ILX, Inc. to Joseph P. Martori as Trustee for the
Cynthia J. Polich Irrevocable Trust, dated January 1, 1996....... *
10.177 Promissory Note ($100,000) by Los Abrigados Partners Limited
Partnership to Martori Enterprises Inc., dated January 1, 1996... *
10.178 Installment Promissory Note ($1,000,000) by ILX, Inc. to Edward
J. Martori, dated October 1, 1994................................ *
</TABLE>

II-11
<PAGE> 123

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.179 Agreement for Transfer of Limited Partnership Interest by ILX,
Inc. and Alan R. Mishkin, dated August 29, 1997.................. *
10.180 Installment Promissory Note ($675,000) by ILX, Inc. to Alan R.
Mishkin dated September 24, 1997................................. *
10.181 Assignment of Limited Partnership Interest by Alan R. Mishkin to
ILX, Inc., dated January 1, 1997................................. *
10.182 Security (Pledge) Agreement between ILX, Inc. and Alan R.
Mishkin, dated September 24, 1997................................ *
10.183 Assignment and Transfer Agreement between ILX, Inc. and Alan R.
Mishkin, dated June 1, 1997...................................... *
10.184 Deed of Trust, Security Agreement and Financing Statement by ILX
Inc. to Tammac Financial Corporation, dated September 7, 1994.... *
10.185 Collateral Assignment of Lease or Leases between ILX Inc. and
Tammac Financial Corporation, dated September 7, 1994............ *
10.186 First Amendment to Loan and Security Agreement between ILX Inc.
and Tammac Financial Corporation, dated September 7, 1996........ *
10.187 Amended and Restated Promissory Note ($2,193,627.46) by ILX Inc.
to Tammac Financial Corporation, dated September 7, 1996......... *
10.188 First Modification of Deed of Trust, Security Agreement and
Financing Statement by ILX Inc. to Tammac Financial Corporation,
dated September 7, 1996.......................................... *
10.189 Commitment Letter from Tammac Financial Corporation to ILX, Inc.,
dated June 28, 1991.............................................. *
10.190 Financing Agreement between Tammac Financial Corporation and Los
Abrigados Partners Limited Partnership, dated September 10,
1991............................................................. *
10.191 Security Agreement from Tammac Financial Corporation to ILE...... *
10.192 Deed of Trust, Assignment of Rents and Security Agreement between
ILX, Inc. and Tammac Financial Corporation, dated September 10,
1991............................................................. *
10.193 Guaranty by ILX, Inc. of the performance by Los Abrigados
Partners Limited Partnership, dated September 10, 1991........... *
10.194 Modification Agreement between Tammac Financial Corporation and
Los Abrigados Partners Limited Partnership, dated August 12,
1992............................................................. *
10.195 Amendment to Commitment Letter, Financing Agreement, and
Reaffirmation of Various Loan Documents, dated March 31, 1993.... *
10.196 Modification to Deed of Trust, Assignment of Rents and Security
Agreement, dated March 31, 1993.................................. *
10.197 Second Modification to Deed of Trust, Assignment of Rents and
Security Agreement, dated September 7, 1994...................... *
10.198 Amended and Restated Guaranty Agreement, dated September 7,
1994............................................................. *
10.199 Fourth Amendment to Financing Agreement, dated September 7,
1996............................................................. *
10.200 Loan Agreement ($598,500) between Tammac Financial Corporation
and Genesis Investment Group, Inc., dated June 18, 1997.......... *
10.201 Promissory Note ($598,500) to Tammac Financial Corporation by
Genesis Investment Group, Inc., dated June 18, 1997.............. *
10.202 Deed of Trust, Assignment of Rents and Security Agreement by
Genesis Investment Group, Inc. to Tammac Financial Corporation,
dated June 18, 1997.............................................. *
10.203 Continuing Unlimited Guarantee by ILX, Inc. of the Obligations of
Genesis Investment Group, Inc.................................... *
</TABLE>

II-12
<PAGE> 124

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.204 Allonge to Promissory Note to Tammac Financial Corporation by
Genesis Investment Group, Inc., dated June 18, 1997.............. *
10.205 Deed of Trust, Assignment of Rents and Security Agreement to
Tammac Financial Corporation by ILX, Inc., dated September 13,
1995............................................................. *
10.206 Deed of Trust, Spreader and Amendment Agreement and Amendment to
Loan Documents between ILX, Inc. and Tammac Financial
Corporation, dated April 12, 1996................................ *
10.207 Modification of Deed of Trust and Amendment to Loan Documents
between ILX, Inc. and Tammac Financial Corporation, dated
December 31, 1996................................................ *
10.208 Third Amendment to Loan and Security Agreement by ILX, Inc. and
Tammac Financial Corporation, dated August 25, 1997.............. **
10.209 Amended and Restated Promissory Note ($5,000,000) to Tammac
Financial Corporation by ILX, Inc., dated August 25, 1997........ *
10.210 Third Modification of Deed of Trust, Assignment of Rents and
Security Agreement between ILX, Inc. and Tammac Financial
Corporation, dated August 25, 1997............................... *
10.211 Construction Loan Agreement between ILX, Inc. and Tammac
Financial Corporation, dated May 28, 1993........................ *
10.212 Promissory Note ($5,000,000) by ILX, Inc. to Tammac Financial
Corporation, dated May 28, 1993.................................. *
10.213 Collateral Assignment by ILX, Inc. to Tammac Financial
Corporation, dated May 28, 1993.................................. *
10.214 Collateral Assignment of Management Agreement between Golden
Eagle Resort, Inc and Tammac Financial Corporation, dated May 28,
1993............................................................. *
10.215 Continuing Guaranty Agreement between ILE Sedona Inc. and Tammac
Financial Corporation, dated May 28, 1993........................ *
10.216 Form of Employment Agreement among ILX Resorts Incorporated and
each of Joseph Martori, Nancy Stone and Edward Zielinski......... *
10.217 Consulting Agreement between Texas
Capital Securities and ILX Incorporated, dated January 7, 1997... *
10.218 Assumption Agreements among Martori Enterprises Incorporated, ILX
Incorporated, Texas Capital Securities and Investor Resource
Incorporated, dated May 2, 1997.................................. ****
10.219 Letter Agreement, dated June 11, 1997, among EVEREN Securities,
Inc. and ILX Incorporated........................................ *
21 List of Subsidiaries of ILX Resorts Incorporated................. **
</TABLE>

II-13
<PAGE> 125

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
23.1 Consent of Squire, Sanders & Dempsey L.L.P....................... See Exhibit 5
23.2 Consent of Deloitte & Touche LLP................................. ***
24 Powers of Attorney............................................... See Signature
Pages
27 Amended Financial Data Schedule.................................. ***
</TABLE>

- ---------------
* To be filed by amendment.

** This exhibit is incorporated by reference to the Company's Annual Report on
Form 10-K for the Year Ended December 31, 1996.

*** Filed herewith.

**** This exhibit is incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the Quarter ended June 30, 1997.

(B) FINANCIAL STATEMENT SCHEDULES

All schedules are omitted as the information required is inapplicable or
the information is presented in the financial statements or the related notes.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-14
<PAGE> 126

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-l and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix and State of Arizona on January 30, 1998.

ILX RESORTS INCORPORATED,
an Arizona corporation

By: /s/ JOSEPH P. MARTORI

------------------------------------
Joseph P. Martori
Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitute and
appoint JOSEPH P. MARTORI and NANCY J. STONE, and each of them, his or her true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all pre- and post-effective amendments
(including any amendments pursuant to Rule 462(b)) to this Form S-1 Registration
Statement, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- -------------------------- -----------------

/s/ JOSEPH P. MARTORI Chairman of the Board and January 30, 1998
- ----------------------------------------------- Chief Executive Officer
Joseph P. Martori (principal executive
officer)
/s/ JAY R. HOFFMAN Senior Vice President and January 30, 1998
- ----------------------------------------------- Chief Financial Officer
Jay R. Hoffman (principal financial
officer)

/s/ NANCY J. STONE President, Chief Operating January 30, 1998
- ----------------------------------------------- Officer and Director
Nancy J. Stone

/s/ EDWARD S. ZIELINSKI Executive Vice President January 30, 1998
- ----------------------------------------------- and Director
Edward S. Zielinski

/s/ STEVEN R. CHANEN Director January 30, 1998
- -----------------------------------------------
Steven R. Chanen
</TABLE>

S-1
<PAGE> 127

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- -------------------------- -----------------

/s/ JAMES W. MYERS Director January 30, 1998
- -----------------------------------------------
James W. Myers

/s/ PATRICK J. MCGRODER Director January 30, 1998
- -----------------------------------------------
Patrick J. McGroder III

/s/ THOMAS J. HAMEL Director January 30, 1998
- -----------------------------------------------
Thomas J. Hamel
</TABLE>

S-2
<PAGE> 128

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.8 First Amended Certificate of Limited Partnership and Amended
Agreement of Los Abrigados Partners Limited Partnership, dated
September 9, 1991................................................ **
10.9 Certificate of Amendment of Limited Partnership for Los Abrigados
Partners Limited Partnership, dated November 11, 1993............ **
10.10 Certificate of Amendment of Limited Partnership for Los Abrigados
Partners Limited Partnership, dated July 1, 1994................. **
10.11 First Amendment to Amended Agreement of Los Abrigados Partners
Limited Partnership, dated February 9, 1996...................... **
10.12 Loan Agreement ($1,000,000) between The Steele Foundation, Inc.,
ILX Incorporated and Los Abrigados Partners Limited Partnership,
dated July 21, 1993.............................................. **
10.13 Second Modification Agreement between ILX Incorporated, Los
Abrigados Partners Limited Partnership, ILE Sedona Incorporated,
and The Steele Foundation, Inc., dated December 20, 1994......... **
10.14 Assignment of Beneficial Interest under Promissory Note, Deed of
Trust and Title Policy to Daniel Cracchiolo as Personal
Representative of the Estate of Ethel Steele by Genesis
Investment Group, Inc., dated June 17, 1994...................... **
10.15 Continuing Guaranty to Daniel Cracchiolo as Personal
Representative of the Estate of Ethel Steele by ILX Incorporated,
dated June 17, 1994.............................................. **
10.16 Purchase and Sale Agreement between Edward J. Martori, Martori
Enterprises Incorporated, Jerome M. White, Guadalupe Iniquez (as
Trustee), Wedbush Morgan Securities (IRA), and Joseph P. Martori
(as Trustee) and ILX Incorporated, dated July 1, 1994............ **
10.17 Installment Promissory Note ($1,000,000) to Edward J. Martori by
ILX Incorporated, dated July 1, 1994............................. **
10.18 Installment Promissory Note ($100,000) to Martori Enterprises
Incorporated by ILX Incorporated, dated July 1, 1994............. **
10.19 Guarantee Fee Agreement between Los Abrigados Partners Limited
Partnership and Arthur J. Martori and Alan R. Mishkin, dated
September 9, 1991................................................ **
10.20 License Agreement between Los Abrigados Partners Limited
Partnership and those certain participants, dated September 1,
1991............................................................. **
10.21 Promissory Note ($900,000) to Cynthia J. Polich Irrevocable Trust
and Edward John Martori by Los Abrigados Partners Limited
Partnership and ILX Incorporated, dated July 27, 1995............ **
10.22 Deed of Trust and Assignment of Rents to Cynthia J. Polich
Irrevocable Trust and Edward John Martori by Los Abrigados
Partners Limited Partnership, dated July 27, 1995................ **
10.23 Real Estate Purchase Contract between Indian Wells Partners,
Ltd., Los Abrigados Partners Limited Partnership and
International Leisure Enterprises Incorporated, dated December
18, 1992......................................................... **
10.24 Option Agreement between Indian Wells Partners, Ltd. and Martori
Enterprises Incorporated, dated March 31, 1994................... **
10.25 Assignment of Option by Martori Enterprises Incorporated to
Genesis Investment Group, Inc., dated September 15, 1994......... **
10.26 Lease Agreement between Indian Wells Partners, Ltd. and Los
Abrigados Partners Limited Partnership, dated December 21,
1992............................................................. **
</TABLE>
<PAGE> 130

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.27 Second Amendment to Lease Agreement between Indian Wells
Partners, Ltd. and Los Abrigados Partners Limited Partnership,
dated March 31, 1994............................................. **
10.28 Loan Agreement ($5,000,000) between The Valley National Bank and
Los Abrigados Partners Limited Partnership, dated September 9,
1991............................................................. **
10.29 Modification Agreement ($5,000,000) between Bank One, Arizona, NA
and Los Abrigados Partners Limited Partnership, dated October 22,
1993............................................................. **
10.30 Second Modification Agreement ($5,000,000) between Bank One,
Arizona, NA and Los Abrigados Partners Limited Partnership, dated
October 4, 1994 additional advance including repayment of prior
$750,000 loan)................................................... **
10.31 Third Modification Agreement ($5,000,000) between Bank One,
Arizona, NA and Los Abrigados Partners Limited Partnership, dated
January 25, 1996 (additional advance)............................ **
10.32 Secured Promissory Note ($2,485,000) to Bank One, Arizona, NA by
Los Abrigados Partners Limited Partnership, dated January 25,
1996............................................................. **
10.33 Letter of Commitment between Tammac Financial Corp. and Los
Abrigados Partners Limited Partnership, dated July 20, 1994...... **
10.34 Financing Agreement between Tammac Financial Corp. and Los
Abrigados Partners Limited Partnership, dated September 10,
1991............................................................. **
10.35 Amendment to Commitment Letter, Financing Agreement and
Reaffirmation of Various Loan Documents between Tammac Financial
Corp., Los Abrigados Partners Limited Partnership and
International Leisure Enterprises Incorporated, dated March 31,
1993............................................................. **
10.36 Third Amendment to Financing Agreement between Tammac Financial
Corp. and Los Abrigados Partners Limited Partnership, dated
September 7, 1994................................................ **
10.37 Amended and Restated Continuing Guaranty to Tammac Financial
Corporation by ILX Incorporated, dated September 7, 1994......... **
10.38 Loan and Security Agreement between Tammac Financial Corp. and
Los Abrigados Partners Limited Partnership, dated September 7,
1994............................................................. **
10.39 Promissory Note ($499,859.15) to Tammac Financial Corp. by Los
Abrigados Partners Limited Partnership, dated September 7,
1994............................................................. **
10.40 Contract of Sale of Membership Agreements and Installment
Purchase Agreements with Recourse between Resort Funding, Inc.
and Los Abrigados Partners Limited Partnership, dated September
14, 1993......................................................... **
10.41 Management Agreement between Bennett Funding International, Ltd.
and Los Abrigados Partners Limited Partnership, ILE Sedona
Incorporated, and ILX Incorporated dated November 21, 1995 (Los
Abrigados Resort)................................................ **
10.42 Promissory Note to Firstar Metropolitan Bank and Trust from Los
Abrigados Partners Limited Partnership, dated November 8, 1993... **
10.43 Change in Terms Agreement ($400,000) between Los Abrigados
Partners Limited Partnership and Firstar Metropolitan Bank and
Trust, dated November 8, 1994.................................... **
10.44 Change in Terms Agreement ($400,000) between Los Abrigados
Partners Limited Partnership and Firstar Metropolitan Bank and
Trust, dated November 8, 1995.................................... **
10.45 Agreement for Purchase and Sale of Kohl's Ranch between Kohl's
Ranch Associates and ILX Incorporated, dated March 10, 1995
(Kohl's Ranch)................................................... **
10.46 Promissory Note ($367,750) to Kohl's Ranch Associates by ILX
Incorporated, dated June 1, 1995 (Kohl's Ranch).................. **
</TABLE>
<PAGE> 131

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.47 Fourth Modification Agreement and Assumption Agreement between
Bank One, Arizona, NA and ILX Incorporated dated June 1, 1995
(Kohl's Ranch)................................................... **
10.48 Letter of Commitment between Tammac Financial Corp. and ILX
Incorporated, dated June 19, 1995 (Kohl's Ranch)................. **
10.49 Promissory Note ($10,000,000) to Tammac Financial Corp. by ILX
Incorporated, dated August 25, 1995 (Kohl's Ranch)............... **
10.50 Loan and Security Agreement between Tammac Financial Corp. and
ILX Incorporated, dated August 25, 1995 (Kohl's Ranch)........... **
10.51 Letter of Commitment between Tammac Financial Corp. and ILX
Incorporated, dated July 20, 1994 (Golden Eagle Resort).......... **
10.52 Loan and Security Agreement between Tammac Financial Corp. and
ILX Incorporated, dated September 7, 1994 (Golden Eagle
Resort).......................................................... **
10.53 Promissory Note ($2,000,000) to Tammac Financial Corp. by ILX
Incorporated, dated September 7, 1994 (Golden Eagle Resort)...... **
10.54 Amended and Restated Financing Agreement between Tammac Financial
Corp. and ILX, Inc. Incorporated, dated September 7, 1994 (Golden
Eagle Resort).................................................... **
10.55 Option Agreement between Imperial Properties and ILX
Incorporated, dated July 25, 1994................................ **
10.56 Joint Venture Agreement between Chanen Development Company, Inc.
and ILE Sedona Incorporated, dated September 28, 1994............ **
10.57 First Amended Certificate of Limited Partnership and Amended
Agreement of The Sedona Real Estate Limited Partnership #1, dated
March 1, 1996 (Lomacasi Resort).................................. **
10.58 Letter Agreement dated February 27, 1996 (Lomacasi Resort)....... **
10.59 Letter of Commitment between Bennett Funding International, Ltd.
and VCA South Bend Incorporated, dated August 18, 1994........... **
10.60 Construction Loan Agreement ($5,000,000) between Bennett Funding
International, Ltd. and VCA South Bend Incorporated, dated
October 4, 1994.................................................. **
10.61 Construction Promissory Note ($5,000,000) to Bennett Funding
International, Ltd. by VCA South Bend Incorporated, dated October
4, 1994.......................................................... **
10.62 Guaranty and Subordination Agreement (Construction Loan) to
Bennett Funding International, Ltd. by ILX Incorporated, dated
August 18, 1994.................................................. **
10.63 Contract of Sale of Timeshare Receivables with Recourse between
Bennett Funding International, Ltd. and VCA South Bend
Incorporated, dated August 18, 1994.............................. **
10.64 Guaranty and Subordination Agreement (Receivables Financing) to
Bennett Funding International, Ltd. by ILX Incorporated, dated
August 18, 1994.................................................. **
10.65 Articles of Limited Partnership between Hotel Syracuse Timeshare
Corporation and Syracuse Project Incorporated, dated August 15,
1995............................................................. **
10.66 Agreement of Purchase and Sale of Real Property, Improvements and
Associated Personalty between Hotel Syracuse, Inc. and Orangemen
Club Limited Partnership, dated September 12, 1995............... **
10.67 Letter of Commitment between Resort Service Company, Inc. and
Orangemen Club Limited Partnership, dated August 9, 1995......... **
</TABLE>
<PAGE> 132

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.68 Service Agreement between Hotel Syracuse, Inc. and Orangemen Club
Limited Partnership, dated September 12, 1995.................... **
10.69 Loan Agreement ($500,000) between Bank One, Arizona, NA and ILX
Incorporated, dated October 4, 1994.............................. **
10.70 Modification Agreement ($500,000) between Bank One, Arizona, NA
and ILX Incorporated, dated October 4, 1995...................... **
10.71 Promissory Note ($500,000) to Bank One, Arizona, NA by ILX
Incorporated, dated October 4, 1994.............................. **
10.72 Consulting Agreement between Investor Resource Services, Inc. and
ILX Incorporated, dated January 1, 1997.......................... **
10.73 Consulting Agreement between Universal Solutions, Inc. and ILX
Incorporated..................................................... **
10.74 Security Agreement between Los Abrigados Partners Limited
Partnership and The Valley National Bank of Arizona, dated
September 9, 1991................................................ *
10.75 Assignment of Management Agreement between Los Abrigados Partners
Limited Partnership and The Valley National Bank of Arizona,
dated September 9, 1991.......................................... *
10.76 Secured Promissory Note ($5,000,000) to The Valley National Bank
of Arizona by Los Abrigados Partners Limited Partnership, dated
September 9, 1991................................................ *
10.77 Deed of Trust to The Valley National Bank of Arizona by Los
Abrigados Partners Limited Partnership, dated September 9,
1991............................................................. *
10.78 Collateral Assignment (and Financing Statement) to The Valley
National Bank of Arizona by Los Abrigados Partners Limited
Partnership, September 9, 1991 (Los Abrigados Resort)............ *
10.79 New Loan Agreement ($750,000) to Los Abrigados Partners Limited
Partnership by The Valley National Bank of Arizona............... *
10.80 Letter Agreement between Los Abrigados Partners Limited
Partnership and The Valley National Bank of Arizona, dated April
8, 1994.......................................................... *
10.81 Modification Agreement between Los Abrigados Partners Limited
Partnership and The Valley National Bank of Arizona, dated June
28, 1994......................................................... *
10.82 Fourth Modification Agreement ($800,000) between Los Abrigados
Partners Limited Partnership and The Valley National Bank of
Arizona, dated September 3, 1997................................. *
10.83 Repayment Guaranty to The Valley National Bank of Arizona by ILX
Inc., dated October 4, 1994...................................... *
10.84 Repayment Guaranty to The Valley National Bank of Arizona by ILX,
dated January 25, 1996........................................... *
10.85 Memorandum of Modification, dated September 3, 1997.............. *
10.86 Deed of Trust to Firstar Metropolitan Bank & Trust by Los
Abrigados Partners Limited Partnership, dated November 8, 1993... *
10.87 Commercial Guaranty to Firstar Metropolitan Bank & Trust by ILX,
Inc.............................................................. *
10.88 Change in Terms of Agreement between Los Abrigados Partners
Limited Partnership and Firstar Metropolitan Bank & Trust, dated
November 8, 1994................................................. *
10.89 Change in Terms of Agreement between Los Abrigados Partners
Limited Partnership and Firstar Metropolitan Bank & Trust, dated,
September 20, 1996............................................... *
</TABLE>
<PAGE> 133

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.90 Change in Terms of Agreement between Los Abrigados Partners
Limited Partnership and Firstar Metropolitan Bank & Trust, dated,
September 25, 1997............................................... *
10.91 Promissory Note ($4,000,000) to Firstar Metropolitan Bank & Trust
by ILX, dated October 28, 1997................................... *
10.92 Deed of Trust between ILX, Inc. and Firstar Metropolitan Bank &
Trust, dated October 28, 1997.................................... *
10.93 Junior Deed of Trust, Assignment of Rents, and Security Agreement
among ILX, Inc., First American Title Insurance Company and
Kohl's Ranch Associates, dated June 1, 1995...................... *
10.94 Secured Line of Credit Lending Agreement between ILX, Inc., Los
Abrigados Partners Limited Partnership, ILE Sedona Inc. and
Litchfield Financial Corporation, dated April 9, 1996............ *
10.95 Secured Line of Credit Promissory Note ($2,000,000) to Litchfield
Financial Corporation by Los Abrigados Partners Limited
Partnership, ILE Sedona Inc., dated April 9, 1996................ *
10.96 First Amendment to Secured Line of Credit Lending Agreement,
dated July 29, 1996.............................................. *
10.97 Second Amendment to Secured Line of Credit Lending Agreement,
dated January 10, 1997........................................... *
10.98 Pledge and Security Agreement between Los Abrigados Partners
Limited Partnership, ILE Sedona Inc. and Litchfield Financial
Corporation, dated April 9, 1996................................. *
10.99 Collateral Assignment of Certain Promissory Notes to Litchfield
Financial Corporation by Los Abrigados Partners Limited
Partnership, ILE Sedona Inc., dated April 9, 1996................ *
10.100 Secured Construction Loan Agreement ($750,000) between Litchfield
Financial Corporation and ILX, Inc., dated September 13, 1996.... *
10.101 Receivables Sale and Purchase Agreement between ILX, Inc. and
Litchfield Financial Corporation, dated February 19, 1997........ *
10.102 Secured Construction Promissory Note ($750,000) to Litchfield
Financial Corporation by ILX, Inc., dated September 13, 1996..... *
10.103 Pledge and Security Agreement between Litchfield Financial
Corporation and ILX, Inc., dated September 13, 1996.............. *
10.104 Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing, dated September 13, 1996......................... *
10.105 First Amendment to Deed of Trust between Litchfield Financial
Corporation and ILX, Inc., dated February 19, 1997............... *
10.106 Collateral Assignment of Deed of Trust and Note by Litchfield
Financial Corporation to Bank of Scotland, dated January 2,
1997............................................................. *
10.107 Amended and Restated Promissory Note............................. *
10.108 Amendment to Collateral Assignment of Deed of Trust and Note
($20,000,000), dated April 7, 1997............................... *
10.109 First Amendment to Deed of Trust, dated February 19, 1997........ *
10.110 Assignment of Mortgages to Litchfield Financial Corporation by
the Bank of Scotland, dated September 25, 1997................... *
10.111 Secured Line of Credit Lending Agreement between ILX, Inc. and
Litchfield Financial Corporation, dated June 27, 1997............ *
</TABLE>
<PAGE> 134

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.112 Secured Line of Credit Promissory Note ($5,000,000) to Litchfield
Financial Corporation by ILX, Inc., dated June 27, 1997.......... *
10.113 Secured Term Promissory Note ($1,500,000) to Litchfield Financial
Corporation by ILX, Inc., dated June 27, 1997.................... *
10.114 Amendment to Secured Line of Credit Lending Agreement, Secured
Line of Credit Promissory Note and Secured Term Promissory Note,
dated June 27, 1997.............................................. *
10.115 Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing between ILX, Inc., Heartsill Ragon III and
Litchfield Financial Corporation, dated June 27, 1997............ *
10.116 Amendment to Deed of Trust to Litchfield Financial Corporation by
ILX, Inc., dated June 27, 1997................................... *
10.117 Absolute and Unconditional Assignment of Deed of Trust to
Litchfield Financial Corporation by ILX, Inc., dated June 27,
1997............................................................. *
10.118 Absolute Assignment of Leases and Rents by ILX, Inc. to
Litchfield Financial Corporation, dated June 27, 1997............ *
10.119 Pledge and Security Agreement between Litchfield Financial
Corporation and ILX, Inc., dated June 27, 1997................... *
10.120 Acknowledgement, Consent and Subordination Agreement between
Kohl's Ranch Associates, Tammac Financial Corporation and
Litchfield Financial Corporation, dated June 27, 1997............ *
10.121 Collateral Assignment of Management, Marketing and Other
Contracts to Litchfield Financial Corporation by ILX, Inc., dated
June 27, 1997.................................................... *
10.122 Credit Terms and Conditions Agreement between ILX, Inc. and
Imperial Bank, Arizona, dated December 30, 1997.................. *
10.123 Promissory Note ($1,000,000) to Imperial Bank, Arizona by ILX,
Inc., dated December 29, 1997.................................... *
10.124 Assignment of Indebtedness and Loan Documents by Tammac Financial
Corporation to Steele Foundation, Inc., dated July 21, 1993...... *
10.135 Assignment of Beneficial Interest under Deed of Trust to Steele
Foundation, Inc. by Tammac Financial Corporation, dated July 21,
1993............................................................. *
10.136 Promissory Note/Collateral Assignment Modification Agreement,
dated July 21, 1993 (includes ILE Sedona)........................ *
10.127 Financing Statement between Steele Foundation, Inc. and ILX, Inc.
and Los Abrigados Partners Limited Partnership, dated July 21,
1993............................................................. *
10.128 Assignment of Deeds of Trust by Los Abrigados Partners Limited
Partnership to Steele Foundation, Inc., dated July 21, 1993...... *
10.129 Assignment of Contract Rights and Accounts Collateral by Los
Abrigados Partners Limited Partnership to Steele Foundation,
Inc., dated July 21, 1993........................................ *
10.130 Blanket Assignment by Los Abrigados Partners Limited Partnership
to Steele Foundation, Inc., dated July 21, 1993.................. *
10.131 UCC Financing Statement by Los Abrigados Partners Limited
Partnership...................................................... *
10.132 Second Modification Agreement between Steele Foundation, Inc. and
ILX, Inc., Los Abrigados Partners Limited Partnership, ILE Sedona
Inc., dated December 20, 1994.................................... *
10.133 Second Amendment to Deed of Trust, Security Agreement and
Financing Statement, dated January 12, 1995...................... *
</TABLE>
<PAGE> 135

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.134 Acquisition and Development Loan Agreement between Bennett
Funding International Ltd. and VCA Tucson Inc., dated October 20,
1995............................................................. *
10.135 Promissory Note ($6,000,000) to Bennett Funding International
Ltd. by VCA Tucson Inc., dated October 20, 1995.................. *
10.136 Mortgage and Security Agreement and UCC-1 Financing Statement to
Bennett Funding International Ltd., dated October 20, 1995....... *
10.137 First Amendment to the Acquisition & Development Loan Agreement
by Bennett Funding International Ltd., VCA Tucson Inc. and ILX,
Inc., dated June 15, 1997........................................ *
10.138 First Amendment to the Acquisition & Development Promissory Note
by Bennett Funding International Ltd., VCA Tucson Inc. and ILS,
Inc., dated June 15, 1997........................................ *
10.139 First Amendment to the Mortgage and Security Agreement and UCC-1
Financing Statement by VCA Tucson Inc., dated June 15, 1997...... *
10.140 Contract of Sale and Timeshare Receivables with Recourse between
VCA Tucson Inc. and Bennett Funding International Ltd., dated
October 20, 1995................................................. *
10.141 First Amendment to the Contract of Sale of Timeshare Receivables
with Recourse by VCA Tucson Inc. and Bennett Funding
International Ltd................................................ *
10.142 Guaranty and Subordination Agreement between ILX, Inc. and
Bennett Funding International Ltd., dated October 20, 1995....... *
10.143 Mortgage and Security Agreement between VCA Tucson Inc. and
Bennett Funding International Ltd., dated October 4, 1994........ *
10.144 Interim Loan Agreement between VCA South Bend, Inc. and Bennett
Funding International Ltd., dated March 31, 1995................. *
10.145 Promissory Note ($2,000,000) to Bennett Funding International
Ltd. by VCA South Bend, Inc., dated March 31, 1995............... *
10.146 Collateral Assignments of Receivables to Bennett Funding
International Ltd. by VCA South Bend, Inc., dated March 31,
1995............................................................. *
10.147 Mortgage and Security Agreement filed October 13, 1994........... *
10.148 Amendment to Mortgage and Security Agreement by VCA South Bend,
Inc. and Bennett Funding International Ltd., dated March 31,
1995............................................................. *
10.149 Guaranty and Subordination Agreement between Bennett Funding
International Ltd. and ILX, Inc., dated October 4, 1993.......... *
10.150 Deed of Trust by ILX, Inc. in favor of Resort Funding, Inc....... *
10.151 Deed of Trust Equal Priority Agreement between Tammac Financial
Corporation and Resort Funding, Inc., dated September 14, 1993... *
10.152 Mortgage and Security Agreement to Bennett Funding International
Ltd. by VCA South Bend, Inc., dated October 4, 1994.............. *
10.153 Contract of Sale of Timeshare Receivables with Recourse between
Bennett Funding International Ltd. and VCA South Bend, Inc.,
dated October 4, 1994............................................ *
10.154 Guaranty and Subordination Agreement between Bennett Funding
International Ltd. and ILX, Inc., dated October 4, 1993.......... *
10.155 Settlement Agreement between Resort Funding, Inc., Los Abrigados
Partners Limited Partnership, ILE Sedona, ILX, Inc. and Martori
Enterprises Inc., dated June 15, 1997............................ *
</TABLE>
<PAGE> 136

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.156 Promissory Note ($2,400,000) by Los Abrigados Partners Limited
Partnership, ILE Sedona Inc., and ILX, Inc. to Resort Funding,
Inc., dated June 15, 1997........................................ *
10.157 Guaranty by ILE Sedona Inc. of Payment under the Settlement
Agreement to Resort Funding, Inc., dated June 15, 1997........... *
10.158 Guaranty by ILX, Inc. of Payment under the Settlement Agreement
to Resort Funding, Inc., dated June 15, 1997..................... *
10.159 Guaranty by Los Abrigados Partners Limited Partnership of Payment
under the Settlement Agreement to Resort Funding, Inc., dated
June 15, 1997.................................................... *
10.160 Acquisition and Development Loan Agreement between Resort
Funding, Inc. and ILX, Inc., dated December 12, 1997............. *
10.161 Acquisition and Development Promissory Note ($700,000) to Resort
Funding, Inc. by ILX, Inc., dated December 12, 1997.............. *
10.162 Deed of Trust and Assignment of Rents to Resort Funding, Inc. by
ILX, Inc., dated December 12, 1997............................... *
10.163 Secured Promissory Note ($770,000) by Los Abrigados Partners
Limited Partnership to Martori Enterprises, Inc. dated August 31,
1992............................................................. *
10.164 Assignment of Deeds of Trust to Martori Enterprises Inc. by Los
Abrigados Partners Limited Partnership, dated August 31, 1992.... *
10.165 Secured Promissory Note ($200,000) to Martori Enterprises Inc. by
Los Abrigados Partners Limited Partnership, dated February 16,
1993............................................................. *
10.166 Financing and Security Agreement between Martori Enterprises Inc.
and Los Abrigados Partners Limited Partnership, dated February
16, 1993......................................................... *
10.167 Assignment of Deeds of Trust by Los Abrigados Partners Limited
Partnership to Martori Enterprises Inc., dated February 16,
1993............................................................. *
10.168 Secured Promissory Note ($150,000) by ILX, Inc. to Martori
Enterprises Inc., dated May 15, 1993............................. *
10.169 Financing and Security Agreement between ILX, Inc. and Martori
Enterprises Inc., dated May 15, 1993............................. *
10.170 Assignment of Deeds of Trust by ILX, Inc. to Martori Enterprises
Inc., dated May 15, 1993......................................... *
10.171 Agreement for Transfer of Limited Partnership Interest between
ILX, Inc. and Martori Enterprises Inc., dated August 8, 1997..... *
10.172 Installment Promissory Note ($1,300,000) by ILX, Inc. to Martori
Enterprises Inc., dated August 8, 1997........................... *
10.173 Security Agreement between ILX, Inc. and Martori Enterprises
Inc., dated August 8, 1997....................................... *
10.174 Installment Promissory Note ($909,078) by ILX, Inc. to Edward J.
Martori, dated January 1, 1996................................... *
10.175 Promissory Note ($230,000) by Los Abrigados Partners Limited
Partnership and ILX, Inc. to Edward J. Martori, dated January 1,
1996............................................................. *
10.176 Promissory Note ($250,000) by Los Abrigados Partners Limited
Partnership and ILX, Inc. to Joseph P. Martori as Trustee for the
Cynthia J. Polich Irrevocable Trust, dated January 1, 1996....... *
10.177 Promissory Note ($100,000) by Los Abrigados Partners Limited
Partnership to Martori Enterprises Inc., dated January 1, 1996... *
10.178 Installment Promissory Note ($1,000,000) by ILX, Inc. to Edward
J. Martori, dated October 1, 1994................................ *
</TABLE>
<PAGE> 137

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.179 Agreement for Transfer of Limited Partnership Interest by ILX,
Inc. and Alan R. Mishkin, dated August 29, 1997.................. *
10.180 Installment Promissory Note ($675,000) by ILX, Inc. to Alan R.
Mishkin dated September 24, 1997................................. *
10.181 Assignment of Limited Partnership Interest by Alan R. Mishkin to
ILX, Inc., dated January 1, 1997................................. *
10.182 Security (Pledge) Agreement between ILX, Inc. and Alan R.
Mishkin, dated September 24, 1997................................ *
10.183 Assignment and Transfer Agreement between ILX, Inc. and Alan R.
Mishkin, dated June 1, 1997...................................... *
10.184 Deed of Trust, Security Agreement and Financing Statement by ILX
Inc. to Tammac Financial Corporation, dated September 7, 1994.... *
10.185 Collateral Assignment of Lease or Leases between ILX Inc. and
Tammac Financial Corporation, dated September 7, 1994............ *
10.186 First Amendment to Loan and Security Agreement between ILX Inc.
and Tammac Financial Corporation, dated September 7, 1996........ *
10.187 Amended and Restated Promissory Note ($2,193,627.46) by ILX Inc.
to Tammac Financial Corporation, dated September 7, 1996......... *
10.188 First Modification of Deed of Trust, Security Agreement and
Financing Statement by ILX Inc. to Tammac Financial Corporation,
dated September 7, 1996.......................................... *
10.189 Commitment Letter from Tammac Financial Corporation to ILX, Inc.,
dated June 28, 1991.............................................. *
10.190 Financing Agreement between Tammac Financial Corporation and Los
Abrigados Partners Limited Partnership, dated September 10,
1991............................................................. *
10.191 Security Agreement from Tammac Financial Corporation to ILE...... *
10.192 Deed of Trust, Assignment of Rents and Security Agreement between
ILX, Inc. and Tammac Financial Corporation, dated September 10,
1991............................................................. *
10.193 Guaranty by ILX, Inc. of the performance by Los Abrigados
Partners Limited Partnership, dated September 10, 1991........... *
10.194 Modification Agreement between Tammac Financial Corporation and
Los Abrigados Partners Limited Partnership, dated August 12,
1992............................................................. *
10.195 Amendment to Commitment Letter, Financing Agreement, and
Reaffirmation of Various Loan Documents, dated March 31, 1993.... *
10.196 Modification to Deed of Trust, Assignment of Rents and Security
Agreement, dated March 31, 1993.................................. *
10.197 Second Modification to Deed of Trust, Assignment of Rents and
Security Agreement, dated September 7, 1994...................... *
10.198 Amended and Restated Guaranty Agreement, dated September 7,
1994............................................................. *
10.199 Fourth Amendment to Financing Agreement, dated September 7,
1996............................................................. *
10.200 Loan Agreement ($598,500) between Tammac Financial Corporation
and Genesis Investment Group, Inc., dated June 18, 1997.......... *
10.201 Promissory Note ($598,500) to Tammac Financial Corporation by
Genesis Investment Group, Inc., dated June 18, 1997.............. *
10.202 Deed of Trust, Assignment of Rents and Security Agreement by
Genesis Investment Group, Inc. to Tammac Financial Corporation,
dated June 18, 1997.............................................. *
10.203 Continuing Unlimited Guarantee by ILX, Inc. of the Obligations of
Genesis Investment Group, Inc.................................... *
</TABLE>
<PAGE> 138

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
10.204 Allonge to Promissory Note to Tammac Financial Corporation by
Genesis Investment Group, Inc., dated June 18, 1997.............. *
10.205 Deed of Trust, Assignment of Rents and Security Agreement to
Tammac Financial Corporation by ILX, Inc., dated September 13,
1995............................................................. *
10.206 Deed of Trust, Spreader and Amendment Agreement and Amendment to
Loan Documents between ILX, Inc. and Tammac Financial
Corporation, dated April 12, 1996................................ *
10.207 Modification of Deed of Trust and Amendment to Loan Documents
between ILX, Inc. and Tammac Financial Corporation, dated
December 31, 1996................................................ *
10.208 Third Amendment to Loan and Security Agreement by ILX, Inc. and
Tammac Financial Corporation, dated August 25, 1997.............. **
10.209 Amended and Restated Promissory Note ($5,000,000) to Tammac
Financial Corporation by ILX, Inc., dated August 25, 1997........ *
10.210 Third Modification of Deed of Trust, Assignment of Rents and
Security Agreement between ILX, Inc. and Tammac Financial
Corporation, dated August 25, 1997............................... *
10.211 Construction Loan Agreement between ILX, Inc. and Tammac
Financial Corporation, dated May 28, 1993........................ *
10.212 Promissory Note ($5,000,000) by ILX, Inc. to Tammac Financial
Corporation, dated May 28, 1993.................................. *
10.213 Collateral Assignment by ILX, Inc. to Tammac Financial
Corporation, dated May 28, 1993.................................. *
10.214 Collateral Assignment of Management Agreement between Golden
Eagle Resort, Inc and Tammac Financial Corporation, dated May 28,
1993............................................................. *
10.215 Continuing Guaranty Agreement between ILE Sedona Inc. and Tammac
Financial Corporation, dated May 28, 1993........................ *
10.216 Form of Employment Agreement among ILX Resorts Incorporated and
each of Joseph Martori, Nancy Stone and Edward Zielinski......... *
10.217 Consulting Agreement between Texas
Capital Securities and ILX Incorporated, dated January 7, 1997... *
10.218 Assumption Agreements among Martori Enterprises Incorporated, ILX
Incorporated, Texas Capital Securities and Investor Resource
Incorporated, dated May 2, 1997.................................. ****
10.219 Letter Agreement, dated June 11, 1997, among EVEREN Securities,
Inc. and ILX Incorporated........................................ *
21 List of Subsidiaries of ILX Resorts Incorporated................. **
</TABLE>
<PAGE> 139

<TABLE>
<CAPTION>
PAGE NUMBERS OR
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- ------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
23.1 Consent of Squire, Sanders & Dempsey L.L.P....................... See Exhibit 5
23.2 Consent of Deloitte & Touche LLP................................. ***
24 Powers of Attorney............................................... See Signature
Pages
27 Amended Financial Data Schedule.................................. ***
</TABLE>

- ---------------
* To be filed by amendment.

** This exhibit is incorporated by reference to the Company's Annual Report on
Form 10-K for the Year Ended December 31, 1996.

*** Filed herewith.

**** This exhibit is incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the Quarter ended June 30, 1997.

<PAGE> 1
EXHIBIT 3(i).6
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION

ILX INCORPORATED

Pursuant to the provisions of A.R.S. Section 10-1001, et seq., the
undersigned Corporation adopts the following amendments to its Articles of
Incorporation:

1. The name of the Corporation is ILX Incorporated.

2. Pursuant to A.R.S. Section 10-1003, as of December 29, 1997, the
Board of Directors of the Corporation adopted the following amendments to the
Articles of Incorporation of ILX Incorporated and resolved that they be
submitted to the Shareholders for their approval at a Special Meeting called for
such purpose:

(a) RESOLVED, that Section 4 of the Articles of Incorporation of the
Corporation, as amended (the "Articles of Incorporation"), be amended to effect
a one-for-five reverse split of the Corporation's outstanding no par value
Common Stock (the "Common Stock"), and shall thereafter read in its entirety as
follows:

Section 4. Authorized Capital: The authorized capital stock of this
Corporation shall be (i) thirty million (30,000,000) shares of common
stock having no par value, and (ii) ten million (10,000,000) shares of
preferred stock having a par value of ten dollars ($10.00) per share.
Each five (5) shares of the Corporation's Common Stock issued as of
Monday, January 12, 1998 (the "Split Effective Date") shall be
automatically changed and reclassified, as of the Split Effective Date
and without further action, into one (1) fully paid and nonassessable
share of the Corporation's Common Stock; provided, however, that any
fractional interest resulting from such change and classification shall
be rounded upward to the nearest whole share;

FURTHER RESOLVED, that the Articles of Incorporation be further amended
by amending Section 1 for the purpose of changing the name of the Corporation,
and shall thereafter read in its entirety as follows:

Section 1. "Name: The name of the corporation (hereinafter called
"Corporation") shall be ILX RESORTS, INCORPORATED."

1
<PAGE> 2
(b) Except as expressly amended herein, all other provisions of the
Articles of Incorporation of this Corporation shall remain unchanged
and in full force and effect as originally filed with the Arizona
Corporation Commission.

3. Pursuant to A.R.S. Section 10-1003, at a Special Meeting held on
January 9, 1998, the holders of the Company's outstanding Common Stock approved
the foregoing amendments. An aggregate of 7,836,256 shares of Common Stock were
indisputably represented at such meeting. The designation and number of
outstanding shares of each class or series entitled to vote on the amendment as
a class or series were as follows:
<TABLE>
<CAPTION>
Class or Series Number of Shares
--------------- ----------------
<S> <C>
Common Stock 12,931,662
</TABLE>

4. The number of shares of each class entitled to vote on the
amendments as a class or series voted for or against each of such amendments,
respectively, which was sufficient for approval by that voting group, as
follows:

(a) With respect to the amendment to Section 4 of the Articles of
Incorporation:
<TABLE>
<CAPTION>
Number of Number of
Class or Series Shares For Shares Against
--------------- ---------- --------------
<S> <C> <C>
Common Stock 7,702,459 116,803
</TABLE>

(b) With respect to the amendment to Section 1 of the Articles of
Incorporation:
<TABLE>
<CAPTION>
Number of Number of
Class or Series Shares For Shares Against
--------------- ---------- --------------
<S> <C> <C>
Common Stock 7,824,564 4,118
</TABLE>

5. The foregoing amendments to the Company's Articles of Incorporation
shall become effective as of 5:00 P.M. Mountain Standard Time on Monday, January
12, 1998.

2
<PAGE> 3
DATED this 12th day of January, 1998.

ILX INCORPORATED,
an Arizona corporation

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

ATTEST:

By /s/ Stephanie Castranova
------------------------------
Stephanie Castranova
Secretary

<PAGE> 1
EXHIBIT 3(i).7

ARTICLES OF CORRECTION

THIS DOCUMENT IS FILED PURSUANT TO THE PROVISIONS OF A.R.S.SECTION 10-124.

ARTICLES OF CORRECTION OF: ILX RESORTS, INCORPORATED

The undersigned hereby submits for filing Articles of Correction
executed on behalf of the above named Corporation, pursuant to the provisions of
the appropriate Statute, referenced above, of the Arizona Revised Statutes.

1. The Article to be corrected is:

Certificate of Amendment of the Articles of Incorporation of ILX
Incorporated (a copy of this document is attached hereto as "Exhibit
A").

Date Filed: January 12, 1998.

2. The inaccuracy in the Articles is:

The name of the corporation was changed to "ILX Resorts, Incorporated".
A comma was inadvertently added to the corporate name after the word"
resorts".

3. The Articles of Correction hereby reads as follows:

The correct name of the corporation is "ILX Resorts Incorporated".
<PAGE> 2
Dated this ___ day of January, 1998.

ILX RESORTS, INCORPORATED,
an Arizona corporation

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

ATTEST:

By Stephanie Castranova
--------------------------
Stephanie Castranova
Secretary

<PAGE> 1
Exhibit 5

[SQUIRE, SANDERS & DEMPSEY LETTERHEAD]

January 29, 1997

VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

RE: ILX RESORTS INCORPORATED

Ladies and Gentlemen:

This firm is special counsel for ILX Resorts Incorporated, an Arizona
corporation (the "Company") with respect to the sale of an undetermined number
of the Company's no par value common stock (the "Shares"), for a proposed
maximum aggregate offering price of $23,000,000, which are the subject of a
Form S-1 Registration Statement under the Securities Act of 1933, as amended.
In such capacity, we are familiar with the Articles of Incorporation and Bylaws
of the Company, as well as resolutions adopted by its Board of Directors
authorizing the issuance and sale of the Shares. In addition, we have examined
such documents and undertaken such further inquiry as we consider necessary for
rendering the opinion set forth below:

Based upon the foregoing, it is our opinion that the Shares, when issued
as described in the Company's Form S-1 Registration Statement, will be duly and
validly issued, fully paid and nonassessable.

We acknowledge that we are referred to under the heading "Legal Matters"
of the Prospectus which is part of the Company's Form S-1 Registration
Statement relating to the Shares and we hereby consent to such use of our name
in such Registration Statement and to the filing of this opinion with state
regulatory agencies in such states as may require such filing in connection
with the registration of the Shares for offer and sale in such states.

Very truly yours,

SQUIRE, SANDERS & DEMPSEY L.L.P.

/s/ Squire, Sanders & Dempsey L.L.P.
------------------------------------

<PAGE> 1

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of ILX Resorts
Incorporated on Form S-1 of our report dated December 23, 1997, except for Note
1, as to which the date is January 9, 1998, appearing in the Prospectus, which
is part of this Registration Statement.

We also consent to the reference to us under the headings "Selected
Consolidated Historical and Pro Forma Financial Information" and "Experts" in
such Prospectus.

/s/ Deloitte & Touche LLP

Phoenix, Arizona
January 29, 1998

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,218,261
<SECURITIES> 0
<RECEIVABLES> 18,955,939
<ALLOWANCES> 3,022,521
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,441,022
<DEPRECIATION> 1,258,918
<TOTAL-ASSETS> 43,860,232
<CURRENT-LIABILITIES> 0
<BONDS> 22,360,783
0
1,384,891
<COMMON> 10,275,111
<OTHER-SE> 4,901,908
<TOTAL-LIABILITY-AND-EQUITY> 43,860,232
<SALES> 17,750,423
<TOTAL-REVENUES> 26,724,252
<CGS> 2,369,296
<TOTAL-COSTS> 23,419,710
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 526,352
<INTEREST-EXPENSE> 1,500,472
<INCOME-PRETAX> 1,820,655
<INCOME-TAX> 656,302
<INCOME-CONTINUING> 986,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 986,046
<EPS-PRIMARY> .37
<EPS-DILUTED> .37

</TABLE>