SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

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


For The Quarter Ended June 30, 2001              Commission File Number 0-25025


                          SEDONA WORLDWIDE INCORPORATED
             (Exact name of registrant as specified in its charter)


            ARIZONA                                      86-0718104
(State or other jurisdiction of             (IRS Employer Identification Number)
 incorporation or organization)


                 3840 North 16th Street, Phoenix, Arizona 85016
                    (Address of principal executive offices)


         Registrant's telephone number, including area code 602-263-9600


             -------------------------------------------------------
             Former name, former address, and former fiscal year, if
                          changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

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

            Class                                  Outstanding at June 30, 2001
-------------------------------                    -----------------------------
Common Stock, without par value                            4,760,902 shares
<PAGE>
                                      PART I

ITEM I. FINANCIAL STATEMENTS

                          SEDONA WORLDWIDE INCORPORATED
                            CONDENSED BALANCE SHEETS

                                                      June 30,      December 31,
                                                       2001            2000
                                                    -----------     -----------
                                     ASSETS

  Cash and cash equivalents                         $    23,015     $    64,283
  Accounts receivable                                    45,490          18,876
  Accounts receivable from officers                          --           9,932
  Inventories                                           217,734         189,749
  Prepaid expenses and other current assets               2,365              --
                                                    -----------     -----------
    Total current assets                                288,604         282,840
  Property and equipment, net                            21,877          30,253
                                                    -----------     -----------
      TOTAL ASSETS                                  $   310,481     $   313,093
                                                    ===========     ===========

                      LIABILITIES & STOCKHOLDERS' EQUITY:

  Accounts payable                                  $   149,209     $    74,407
  Note payable - Related Party                          188,379         200,000
  Accrued expenses                                        8,872          10,248
                                                    -----------     -----------
    Total current liabilities                           346,460         284,655
                                                    -----------     -----------
  Preferred stock, $10 par value - authorized,
   5,000,000 shares, none issued                             --              --

  Common stock, no par value; 50,000,000
   shares authorized; 4,760,902 shares
   issued and outstanding                             1,009,783       1,009,783
  Contributed capital                                 2,545,730       2,545,730
  Deficit                                            (3,591,492)     (3,527,075)
                                                    -----------     -----------
    Total stockholders' equity                          (35,979)         28,438
                                                    -----------     -----------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $   310,481     $   313,093
                                                    ===========     ===========

                 See notes to condensed financial statements

                                       1
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                        CONDENSED STATEMENT OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                             Three months ended June 30,   Six months ended June 30,
                                             --------------------------    --------------------------
                                                2001           2000           2001           2000
                                             -----------    -----------    -----------    -----------
<S>                                          <C>            <C>            <C>            <C>
Net Sales                                    $   141,665    $    91,182    $   284,726    $   204,259
Cost of sales                                     70,607         51,822        136,423        101,443
                                             -----------    -----------    -----------    -----------
   Gross profit                                   71,058         39,360        148,303        102,816
Selling, general & administrative expense        107,000         75,338        201,720        130,462
                                             -----------    -----------    -----------    -----------
(Loss) from operations                           (35,942)       (35,978)       (53,417)       (27,646)
Interest expense                                   5,219             --         11,000             --
                                             -----------    -----------    -----------    -----------
       Net (loss)                                (41,161)       (35,978)       (64,417)       (27,646)
                                             ===========    ===========    ===========    ===========
Weighted average shares of common stock
   outstanding                                 4,760,902      4,422,885      4,760,902      4,353,993
Basic and diluted (loss) per share           $     (0.01)   $     (0.01)   $     (0.01)   $     (0.01)
                                             ===========    ===========    ===========    ===========
</TABLE>

                 See notes to condensed financial statements

                                       2
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                                                       Six months ended June 30,
                                                       -------------------------
                                                         2001            2000
                                                       --------        --------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                             $(64,417)       $(27,646)

  Adjustments to reconcile net loss to net cash
    used in operating activities:
  Depreciation and amortization                           8,376          19,088
  Changes in operating assets and liabilities
  Accounts receivable                                   (16,682)         (4,339)
  Inventory                                             (27,985)         16,407
  Prepaid and other                                      (2,365)            926
  Accounts payable                                       74,802          12,291
  Accrued expense                                        (1,376)        (15,450)
                                                       --------        --------
Net cash provided by (used in) operating activities     (29,647)          1,277
                                                       --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES:


CASH FLOWS FROM FINANCING ACTIVITIES:

  Net proceeds from issuance of common stock                 --           9,783
  Principal payments on note payable                    (11,621)             --
                                                       --------        --------
Net cash provided by (used in) financing activities     (11,621)          9,783
                                                       --------        --------

INCREASE (DECREASE) IN CASH                             (41,268)         11,060

CASH AT BEGINNING OF PERIOD                              64,283           9,564
                                                       --------        --------

CASH AT END OF PERIOD                                  $ 23,015        $ 20,624
                                                       ========        ========

                 See notes to condensed financial statements

                                       3
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1. INTERIM FINACIAL STATEMENTS

     The  accompanying   unaudited  condensed  financial  statements  have  been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States for interim  financial  information  and the  instructions to Form
10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and notes required by accounting  principles  generally accepted
in the United  States  for  complete  financial  statements.  In the  opinion of
management,  all adjustments and  reclassifications  considered  necessary for a
fair  and  comparable  presentation  have  been  included  and  are of a  normal
recurring  nature.  Operating  results for the three and six-month periods ended
June 30, 2001 are not necessarily indicative of the results that may be expected
for the year ending  December 31, 2001.  The  accompanying  unaudited  condensed
financial  statements  should be read in  conjunction  with the  Company's  most
recent audited financial statements.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

     On  July  20,  2001,  the  Financial   Accounting  Standards  Board  issued
Statements  of  Financial  Accounting  Standards  ("SFAS")  No.  141,  "Business
Combinations"  and SFAS No. 142 "Goodwill and Other  Intangible  Assets".  These
pronouncements  significantly  change the accounting for business  combinations,
goodwill,    and    intangible    assets.    SFAS   No.   141   eliminates   the
pooling-of-interests  method of accounting for business combinations and further
clarifies the criteria to recognize  intangible assets separately from goodwill.
The  requirements  of SFAS No. 141 are  effective  for any business  combination
accounted for by the purchase method that is completed after June 30, 2001. This
statement will have no current impact on the Company's financial statements.

     SFAS No. 142 states goodwill and indefinite lived intangible  assets are no
longer amortized but are reviewed for impairment annually (or more frequently if
impairment indicators arise). Separable intangible assets that are not deemed to
have an indefinite  life will continue to be amortized  over their useful lives.
The  amortization  provisions  of SFAS No. 142 apply to goodwill and  intangible
assets  acquired  after June 30, 2001.  With respect to goodwill and  intangible
assets  acquired  prior to July 1, 2001,  companies  are  required  to adopt the
pronouncement  in their fiscal year beginning  after December 15, 2001.  Because
the Company does not have any goodwill or  intangible  assets with an indefinite
life, this new accounting  policy will not result in a cumulative  change to the
financial statements.

NOTE 3. BUSINESS CONDITION

     As shown in the accompanying  financial  statements,  the Company had a net
loss of $41,161 and $64,417 during the three and six months ended June 30, 2001.
As of June 30, 2001, the Company's  working  capital deficit was $57,856 and its
accumulated  deficit was $3,591,492.  These factors create an uncertainty  about
the Company's ability to continue as a going concern.  The financial  statements
do not include any adjustments  that might be necessary if the Company is unable
to continue as a going concern.

                                       4
<PAGE>
                          SEDONA WORLDWIDE INCORPORATED

                   NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

     The Company's continuation as a going concern is dependent upon its ability
to generate  sufficient  cash flow to meet its obligations on a timely basis, to
obtain  financing  as may be  required,  and  ultimately  to  attain  profitable
operations.  In order to  achieve  profitability  it will be  necessary  for the
Company to  substantially  increase its revenue.  While there are presently some
opportunities  in progress  that may  generate  sufficient  additional  sales to
generate profits, there can be no assurance that such revenues will be generated
from current sources.  The Company may pursue debt or equity financing that will
enable it to invest in  marketing  and  distribution  geared  toward  generating
greater revenues. However, there can be no assurance that such financing will be
available or that the marketing and  distribution  efforts will be successful in
generating sufficient sales to achieve profitability.  ILX has provided $200,000
of additional financing that was originally due to ILX on November 30, 2000. The
Company  has agreed to an  extension  on the date that the loan is due to ILX in
return for securing the loan with the Company's  tangible assets.  The extension
states that the  principal  will be due on December 31,  2001.  All amounts bear
interest equal to the prime rate plus 3% per annum payable  monthly.  As of June
30, 2001, the interest rate was 10.0%.

ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     THE FOLLOWING  DISCUSSION OF THE COMPANY'S  FINANCIAL CONDITION AND RESULTS
OF OPERATIONS  INCLUDES CERTAIN  FORWARD-LOOKING  STATEMENTS.  WHEN USED IN THIS
FORM 10-QSB,  THE WORDS "ESTIMATE,"  "PROJECTION,"  "INTEND,"  "ANTICIPATES" AND
SIMILAR TERMS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS THAT RELATE TO
THE COMPANY'S  FUTURE  PERFORMANCE.  SUCH  STATEMENTS ARE SUBJECT TO SUBSTANTIAL
UNCERTAINTY.   READERS  ARE  CAUTIONED  NOT  TO  PLACE  UNDUE  RELIANCE  ON  THE
FORWARD-LOOKING STATEMENTS SET FORTH BELOW. THE COMPANY UNDERTAKES NO OBLIGATION
TO PUBLICLY  UPDATE OR REVISE ANY OF THE  FORWARD-LOOKING  STATEMENTS  CONTAINED
HEREIN.

OVERVIEW

     Sedona Worldwide  Incorporated was formed in 1992 to develop,  test, market
and distribute its own proprietary  "Sedona Spa" branded lines of face, hair and
body care products and apparels containing  ingredients or materials  indigenous
to, and  embodying the appeal of, the  Southwestern  region of the United States
and of Sedona, Arizona in particular. To date, the Company has generated revenue
primarily  through the sale of its face, hair and body care products to ILX. ILX
distributes  the  Company's  products  as in-room  amenities  at its resorts and
hotels,  as  premiums  (incentives)  to its  customers  for  attending  vacation
ownership  sales  presentations,  and for retail sales at its resort gift shops,
and at the Sedona Spa at Los Abrigados  Resort & Spa. The Company also generates
revenue from direct mail sales to consumers (many of whom were introduced to the
products as in-room amenities or premiums) and from limited retail  distribution
in specialty shops.

                                       5
<PAGE>
RESULTS OF OPERATIONS

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

                                        Three Months Ended     Six Months Ended
                                             June 30,              June 30,
                                        ------------------     ----------------
                                         2001        2000       2001      2000
                                         ----        ----       ----      ----
Net sales:
Sales to ILX (1)                         71.5%       72.6%      71.3%     63.0%
Sales to customers other than ILX        28.5%       27.4%      28.7%     30.4%
Sales previously deferred (2)             0.0%        0.0%       0.0%      6.6%
                                        -----       -----      -----     -----
Total sales                             100.0%      100.0%     100.0%    100.0%
                                        =====       =====      =====     =====
As a percentage of net sales:
Cost of sales                            49.8%       56.8%      47.9%     49.7%
Contribution margin                      50.2%       43.2%      52.1%     50.3%
Sales, general and administrative
 expense                                 75.5%       82.6%      70.8%     63.9%
Net loss                                (29.1%)     (39.5%)    (22.6%)   (13.5%)

----------
(1)  Sales  made to ILX are made at lower  prices  (generally  cost plus a small
     mark up) than sales made to customers other than ILX.
(2)  Sales  previously  deferred  refers to a  one-time  recognition  of revenue
     related to unredeemed product certificates.

COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 TO THE THREE AND SIX
MONTHS ENDED JUNE 30, 2001

     Net sales increased 55.3% or $50,483 to $141,665 for the quarter ended June
30, 2001 from $91,182 for the same period in 2000 and increased 39.3% or $80,467
to $284,726  for the six months  ended June 30, 2001 from  $204,259 for the same
period  in  2000.  The  increase  in the  current  quarter  is  due to a  larger
percentage  of sales to  customers  other than ILX and the addition of other ILX
sites.  Sales made to ILX are  generally at lower prices than sales to customers
other than ILX.  The increase  for the year to date is due to a  combination  of
increased sales to non-ILX customers and the addition of other ILX sites.

     Cost of sales as a  percentage  of sales  decreased  to 49.8% for the three
months ended June 30, 2001 from 56.8% for the same period in 2000 and  decreased
to 47.9% for the six months  ended June 30,  2001 from 49.7% for the same period
in 2000,  because of reduced  product  costs as a result of  discounts  achieved
through  higher volume  purchasing as well as set-up fees and dye charges having
been paid through previous orders.

     Sales,  general and  administrative  expenses increased $31,662 to $107,000
for the three  months  ended June 30,  2001 from  $75,338 for the same period in
2000 and  increased  $71,258 to $201,720  for the six months ended June 30, 2001
from  $130,462  for the same  period  in  2000,  due to  increased  advertising,
printing and promotional expenses.

     Interest  expense  increased  to $5,219 for the three months ended June 30,
2001  from $0 for the same  period  in 2000 and  increased  $11,000  for the six
months  ended  June 30,  2001 from $0 for the same  period  in 2000,  reflecting
interest payments on note payable to ILX.

     There is no income tax benefit  recorded  in 2000 or 2001.  The Company has
recorded a valuation allowance equal to its deferred tax asset at June 30, 2001.
Under SFAS No. 109,  deferred tax assets and  liabilities are recognized for the
estimated future tax effects  attributable to differences between the amounts of
the Company's  existing assets and  liabilities and their  respective tax basis.
Because  the  Company  has not  yet  generated  taxable  income,  and  therefore
sufficient  evidence  does not exist that  differences  in financial and taxable
income and net operating  loss  carryforwards  will be utilized to reduce future
income  taxes,  no income tax  benefit has been  recorded  for the three and six
month periods ended June 30, 2001.

                                       6
<PAGE>
COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 TO THE THREE AND SIX
MONTHS ENDED JUNE 30, 2000

     Net sales  increased  5.2% or $4,521 to $91,182 for the quarter  ended June
30, 2000 from $86,661 for the same period in 1999 and increased  7.2% or $13,666
to $204,259  for the six months  ended June 30, 2000 from  $190,593 for the same
period in 1999.  The small  increase in the  current  quarter is due to a larger
percentage of sales to customers other than ILX. Sales made to ILX are generally
at lower  prices than sales to  customers  other than ILX.  The increase for the
year to date is due to a combination of increased sales to non-ILX customers and
to a one-time  realization of previously  deferred revenue related to unredeemed
product certificates.

     Cost of sales as a  percentage  of sales  decreased  to 56.8% for the three
months ended June 30, 2000 from 70.5% for the same period in 1999 and  decreased
to 49.7% for the six months  ended June 30,  2000 from 71.8% for the same period
in 1999  because of a lower  percentage  of sales to ILX  resorts,  which have a
lower profit  margin,  reduced  product costs as a result of discounts  achieved
through  higher  volume  purchasing,  as well  as the  one-time  recognition  of
previously deferred income.

     Sales, general and administrative expenses decreased $20,252 to $75,338 for
the three  months  ended June 30, 2000 from  $95,590 for the same period in 1999
and  decreased  $45,257 to $130,462  for the six months ended June 30, 2000 from
$175,719 for the same period in 1999, due to decreased overhead expenses related
to the Spin-Off.

     Interest  expense  decreased  to $0 for the three and six months ended June
30,  2000  from  $397  and  $944 for the  same  periods  in 1999,  respectively,
reflecting the fulfillment of capital lease obligations.

     There is no income tax benefit  recorded  in 1999 or 2000.  The Company has
recorded a valuation allowance equal to its deferred tax asset at June 30, 2000.
Under SFAS No. 109,  deferred tax assets and  liabilities are recognized for the
estimated future tax effects  attributable to differences between the amounts of
the Company's  existing assets and  liabilities and their  respective tax basis.
Because  the  Company  has not  yet  generated  taxable  income,  and  therefore
sufficient  evidence  does not exist that  differences  in financial and taxable
income and net operating  loss  carryforwards  will be utilized to reduce future
income  taxes,  no income tax  benefit has been  recorded  for the three and six
month periods ended June 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

SOURCES OF CASH

     The Company  generates cash primarily from the sale of its own  proprietary
"Sedona Spa"  branded  lines of face,  hair and body care  products and apparels
containing  ingredients or materials indigenous to, and embodying the appeal of,
the  Southwestern  region  of the  United  States  and  of  Sedona,  Arizona  in
particular.  During the six-month  period ended June 30, 2000,  cash provided by
operations  was $1,277.  During the six-month  period ended June 30, 2001,  cash
used in operations was equal to $29,647.  Historically, the Company's cash flows
from  product  sales  have  not been  sufficient  to fund  its  operations,  and
shortfalls  have been  funded by ILX.  ILX  advanced  the  Company $0 in the six
months ended June 30, 2000;  no funds were advanced in the six months ended June
30, 2001.

     At the time of the  Spin-Off,  the Company was indebted to ILX in an amount
in excess of $2,545,000,  which ILX  contributed to capital in conjunction  with
the Spin-Off.  Subsequently,  ILX has provided $200,000 of additional financing.
All amounts  borrowed by the Company bear interest  equal to the prime rate plus
3% per annum, with interest payable monthly. The entire unpaid principal will be
due on December 31, 2001.  Without this  financing from ILX, or other sources of
working capital  financing which at present do not exist, the Company's  current
cash flows will be  insufficient  to meet its  liquidity,  operating and capital
requirements.  The Company currently has no credit facility with a bank or other
financial  institution.  The Company will attempt to obtain a credit facility to
address its cash flow needs;  however,  there can be no assurance  that any such
financing  will be  available  if  needed,  or,  if  available  will be on terms
acceptable to the Company.

                                       7
<PAGE>
     The Company anticipates that its expenses will increase in the future as it
attempts to expand its business by acquiring new products and  increasing  sales
and marketing efforts and other  operations.  The Company expects to continue to
incur losses until such time, if ever, as it is able to sell a sufficient volume
of products at prices that  provide  adequate  gross  profit to cover  operating
costs.  The Company's  working  capital  requirements  will depend upon numerous
factors,  including payment cycles for its shipped products, credit arrangements
with suppliers,  the scale-up of its sales and marketing resources,  acquisition
of new products and the terms upon which such products are acquired, competitive
factors, and marketing activities.  There can be no assurance when, if ever, the
Company will be able to generate  sufficient  revenues  from its  operations  to
offset its expenses or to secure additional capital commitments.  If the Company
is unable  to  generate  more  cash  flows  than it does  currently,  it will be
insolvent and may have to discontinue its business operations.

USES OF CASH

     Investing  activities  typically  reflect  a net use of cash for  equipment
purchases.  There were no  purchases of property  and  equipment  during the six
months ended June 30, 2000 and 2001.

CREDIT FACILITIES AND CAPITAL

     The Company has never accessed commercial financing and to date, all of its
working  capital needs have been  financed by operations  and advances from ILX.
However,  following  the  Spin-Off,  ILX does not  intend to fund the  Company's
future cash  shortfalls,  except as follows:  In October 2000,  ILX has provided
$200,000 of working capital  financing to the Company.  All amounts  borrowed by
the Company under this agreement will bear interest equal to the prime rate plus
3% per annum,  with interest  payable  monthly,  and the entire unpaid principal
amount due on December  31, 2001.  As a result,  the Company will need to secure
alternative  financing  sources if it continues to operate at a loss or, even if
profitable,  it pursues a growth  strategy.  There can be no assurance that such
resources  will be available to the Company when needed and on favorable  terms.
In  addition,  any  commercial  financing  obtained is likely to impose  certain
financial  and  other  restrictive  covenants  upon the  Company  and  result in
increased  interest  expense.  Although  the  Company  anticipates  the need for
additional  financing,  it does not  presently  have any  plans to  engage in an
equity or debt financing transaction.

SEASONALITY

     Presently the Company's revenues are only minimally seasonal, with slightly
increased  sales during the second and third  quarters and December,  reflecting
seasonality in resort guests of its major customer,  ILX. If the Company is able
to expand its customer  base and  marketing  and  distribution  methods,  it may
experience  different  seasonality  dynamics that may cause operating results to
fluctuate.

CONCENTRATION

     The  substantial  majority  of the  Company's  revenues  to date  have been
generated from ILX.  There are no long-term  commitments to purchase by ILX and,
in the event ILX  ceased to be a  customer  of the  Company,  revenues  would be
significantly  impacted.  If ILX remains a customer,  revenues  are  expected to
increase as ILX adds more resorts  (which utilize  in-room  amenities) and sales
offices  (which  offer  premiums to touring  guests),  although  there can be no
assurances in this regard.

INFLATION

     Inflation  and  changing  prices  have  not had a  material  impact  on the
Company's revenues, income or loss from operations or net income or loss for the
six months ended June 30, 2000 or 2001.

                                       8
<PAGE>
                                     PART II

ITEM I. LEGAL PROCEEDINGS

     The  Company  is not  currently  the  subject  of any  pending  or,  to its
knowledge, threatened legal claims.

ITEM II. CHANGES IN SECURITIES AND USE OF PROCEEDS

     None

ITEM III. DEFAULTS UPON SENIOR SECURITIES

     None

ITEM IV. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None

ITEM V. OTHER INFORMATION

     None

ITEM VI. EXHIBITS AND REPORTS ON FORM 8-K

     (i)  Exhibits

          None

     (ii) Reports on Form 8-K

          None

                                       9
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  the Registrant has duly caused its quarterly report on Form 10-Q to be
signed on its behalf by the undersigned thereunto duly authorized.


                                    SEDONA WORLDWIDE INCORPORATED
                                    (Registrant)


                                    /s/ Patrick J. McGroder III
                                    ---------------------------------
                                    Patrick J. McGroder III
                                    Chairman of the Board


                                    /s/ Mia A. Martori
                                    ---------------------------------
                                    Mia A. Martori
                                    Director, President and Treasurer

Date: As of August 15, 2001

                                       10